New Thai Prime Minister Anutin Charnvirakul’s key cabinet choices may be seen as a reassuring signal by investors who have long been frustrated by the nation’s frequent bouts of political turmoil.
Anutin, who announced key posts even before he received the customary royal endorsement, said he took swift action because his commitment to hold a fresh election within four months means there’s little time to waste. That may help turn things around in Thailand, where the benchmark stock index is Asia’s worst performer this year — it’s down almost 10%, while MSCI’s Asia-Pacific gauge is up 17% — and foreign investors have pulled out a net US$2.5 billion.
The Thai baht has gained about 6% this year, helped by broad dollar weakness and a rally in gold.
“The Thai stock market could take the news positively since the list of incoming ministers are all outsiders with real experience and ability,” said Poon Panichpibool, a market strategist at Krung Thai Bank Pcl in Bangkok. “But I don’t think we’ll see a big rally until there’s clarity on the full cabinet lineup and the new government’s policies, especially on the economy.”
Anutin moved quickly to stitch together an unlikely alliance of pro-establishment parties and the biggest pro-democracy group to claim power. The conservative politician with royalist credentials tapped seasoned bureaucrat Ekniti Nitithanprapas as finance minister and Auttapol Rerkpiboon, a former chief executive of energy giant PTT Pcl, to run the energy ministry. He also nominated veteran diplomat Sihasak Phuangketkeow as foreign minister.
The choice of Ekniti as finance minister will “ensure continuity during the government’s short tenure, rather than bringing in someone new to the role,” according to Burin Adulwattana, managing director and chief economist of Kasikorn Research Center Co.
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Anutin swept to power after a political drama that followed the court dismissal of Paetongtarn Shinawatra for ethical misconduct. The turmoil was the latest headwind for an economy already buffeted by the highest household debt in Southeast Asia, a downturn in its vital tourism sector and the blow from US tariffs. Thailand’s economy is projected to grow about 2% this year — less than half the pace forecast for regional peers like Indonesia and the Philippines.
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Korn Chatikavanij, a former finance minister, lauded Ekniti’s nomination, saying on Facebook that “he’s a very good choice: clean-handed, knows the job, and a true insider at the Finance Ministry.” But “with such limited time, no one can solve every problem,” he said.
Krung Thai Bank’s Poon expects the ministries of commerce and finance, along with the Bank of Thailand, to “work hand-in-hand to fix the current pressing economic problems by coordinating fiscal and monetary policies.”
Vitai Ratanakorn, a seasoned banker, is set to take over as BOT governor next month.
Still, outgoing BOT governor Sethaput Suthiwartnarueput said last week that monetary policy is constrained with rates at multiyear lows. He also warned that Thailand’s credit rating faces risks without fiscal consolidation and reduced political uncertainty. The BOT has cut the benchmark interest rate by a cumulative 100 basis points since last October to 1.5%.
Economists largely forecast one quarter-point BOT rate cut by year-end, with some predicting more, according to data compiled by Bloomberg.
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Anutin’s ability to focus on economic policy is likely to be constrained by both limited time and his party’s minority status in parliament, said Tim Leelahaphan, a Bangkok-based economist at Standard Chartered Plc. He expects the economic agenda to be driven primarily by monetary policy, rather than fiscal initiatives, and forecasts a non-consensus call for a 50 basis point rate cut in October.
The baht will continue to be influenced by more global factors, according to Poon and Malayan Banking Bhd.
“We do not expect a sustained impact on the currency from the political situation,” said Alan Lau, a strategist at Maybank in Singapore. “The budget has already been passed, giving some clarity for the economic outlook. The baht is looking to be more driven by broad dollar and gold price movements.”
