Thailand replacing top two economic officials amid crisis

BANGKOK • Thailand is replacing the top two officials steering the economy through its worst crisis, injecting more uncertainty into the policy outlook.

Finance Minister Uttama Savanayana resigned last Thursday ahead of a Cabinet reshuffle, with Prime Minister Prayut Chan-o-cha saying he will announce a likely replacement by next month.

At the Bank of Thailand, the search for a successor to governor Veerathai Santiprabhob is entering the final stages, although the Cabinet changes may delay that process. Mr Veerathai, 50, has declined to seek a new term when his current one ends in September.

The upheaval comes at a time of heightened uncertainty in the global economy and a slump in export-and tourism-reliant Thailand that is among the worst in Asia.

The finance minister and central bank governor helped shape a 1.9 trillion baht (S$83 billion) stimulus package that is meant to curb the economic fallout from the pandemic, and investors want to see those funds put to work.

"We are in a crucial time of transition from lockdown to resumption of business, so the continuation of key policies is very important to help the economy hit by the outbreak," said Mr Vasin Vanichvoranun, chairman of Kasikorn Asset Management. The sooner the replacements are found, the better, he added.

Mr Somkid Jatusripitak, who was deputy prime minister in charge of the economy, also resigned alongside Mr Uttama last week, another blow to the government's management team.

Yesterday, Labour Minister Chatumongol Sonakul said he had resigned from his post, making him the sixth minister to quit the government since late last week. He did not give a reason or comment further. He had last month stepped down as leader of the Action Coalition for Thailand, one of 20 partners in Mr Prayut's government.

Earlier yesterday, Minister to the Prime Minister's Office Tewan Liptapanlop resigned from the Cabinet. Other than Mr Uttama and Mr Somkid, two other ministers also quit on Thursday.

Mr Prayut is set to make his first Cabinet changes since his victory in last year's disputed election.

A former army chief, he led a military coup in 2014 and ruled as the head of a junta for five years before returning at the head of a multi-party coalition after the vote.

Mr Uttama was recently replaced as leader of the largest political party in the coalition.

Youth-led protests have resumed against Mr Prayut. Thousands of protesters gathered in Bangkok and a few other cities over the weekend to demand the government's resignation, drawing the biggest crowds since the lockdown began in March.

The political shake-up could not have come at a worse time for the economy. The central bank expects gross domestic product to shrink 8.1 per cent this year. It is also dealing with currency turmoil that is undermining exports, and is examining new ways of supporting the economy as it runs out of conventional policy space.

Mr Veerathai said at a seminar yesterday that it will take about two years for the economy to return to its pre-Covid levels, based on the assumption that the outbreak can be kept under control.

Rather than a V-shaped recovery, he sees the trajectory more like a "check mark with a long tail".

"I am concerned the most about employment as tourism and related businesses employ lots of people," the governor said. "When the outbreak hit, so many people lost their jobs" and many probably will not get them back, he added.

The finance minister post is a key one market participants are watching. Mr Prayut said last week he is waiting to hear from potential successors he has approached - some of whom are "outsiders" without political backgrounds.

One of the candidates he approached is a well-known banker, who has emerged as the possible front runner for the post.

The new finance minister will pick the next central bank governor from a shortlist of candidates. A selection committee received six applications for the position, including from two current deputy governors. The likely front runner, according to media reports, is a current member of the bank's Monetary Policy Committee.

Investors are heartened by the fact that the likely replacements are well known and qualified, but expect the road ahead to be a difficult one. "What the newcomers need to deal with are real tough jobs," said Mr Win Phromphaet, chief investment officer of Principal Asset Management in Bangkok.

"The central bank has limited policy space and they will need to handle rising bad debts going forward, while the task of the finance minister, who will need to boost the economy after Covid-19, is also very difficult."

BLOOMBERG, REUTERS