BANGKOK -- The relative stability of Thailand's stock prices and currency in the wake of the death of its king and Donald Trump's unexpected presidential victory in the U.S. is more a symptom of the economy's lack of vigor than a sign of its strength.
"Declining consumer sentiment and mitigation in leisure activities may further slow Thailand's economy in the October-December quarter," Secretary-General Porametee Vimolsiri of the Office of the National Economic and Social Development Board told reporters Monday.
Real gross domestic product grew 3.2% on the year in the July-September quarter, slowing from the 3.5% growth in the April-June quarter, the NESDB reported Monday. Working backward from its 3.2% annual GDP growth projection for 2016, the board expects a further slowdown in the final quarter of the year.
The Oct. 13 passing of King Bhumibol Adulyadej, a father-like figure for the nation, has cast a shadow over Southeast Asia's second-largest economy. Analysts have expressed concerns that sales of cars and other durable goods, as well as demand for services like dining and travel, could sink during the national mourning period. Yet the markets' reaction has been far from a panic.
Equity prices and the baht did plunge around time of King Bhumibol's death, but they stabilized within a week. And although foreign investors turned net sellers on the Stock Exchange of Thailand for the first time in six months in October, by the end of the month, the benchmark stock index and the baht had recovered nearly to where they stood in late September.
Then Trump's win caused another tremor. Emerging-market currencies such as the Mexican peso and Turkish lira plummeted against the dollar. In Southeast Asia, the Malaysian ringgit and Indonesian rupiah also sold off.
The U.S. election outcome had a harsher impact on Thailand's stocks and currency than the king's death did. Net sales of Thai equities by foreign investors totaled 29.3 billion baht ($822 million) for the month of November up to Tuesday, 1.6 times the tally for all of October. Even so, compared with the impacts felt in Indonesia and Malaysia, capital outflows were minimal. The SET index dropped about 1.5%, while the baht fell by around the same margin against the dollar.
Stability without spark
Paul Mackel, head of emerging-market foreign exchange research at HSBC, and colleagues at the U.K. bank predicted in a Nov. 16 note that the Thai currency's slide against the dollar will bottom out at 36.7 baht.
They cited as grounds for this prediction Thailand's current-account surplus and strong tourism industry. Both are seen as factors underpinning a stronger baht. The HSBC report concludes that there is little risk of capital outflows driving down the baht sharply. Stock prices are supported by healthy corporate earnings, which in turn benefit from low resource prices.
Yet Thailand's current-account surplus, normally seen as a stabilizing factor for the economy, is also product of the economy's structural problems. The surplus hit $36.1 billion in the January-September period, according to the Bank of Thailand. That is more than 10% greater than the 2015 count, which was the highest annual figure since the 2008 financial crisis. The growing surplus points to a lack of domestic demand.
Thailand is the fastest-aging nation in emerging Southeast Asia. The country's working-age population -- ages 15 to 64 -- will peak in 2016 and begin to fall next year, United Nations estimates show. And from 2024, the total population is forecast to shrink, stagnating domestic consumption.
While the Thai stock market has taken hits since October, it has remained relatively stable overall. But that stability conceals future vulnerabilities.