Political instability likely to affect Thailand's economy.

Under normal circumstances the chart above would be cause for optimism about the Thai economy. After all, linear trend lines (not shown) drawn through both per capita income (light blue) and private consumption (yellow) would slope sharply upward, in spite of the 2005-2006 downturn. But circumstances in Thailand have been anything but normal lately.

When he was reelected early in 2005 by a resounding majority, the victorious prime minister was the first prime minister in the history of the country to have completed a full four year term. And he was also the first of the country's 22 premiers to be elected to a second consecutive term. Both facts come from an April 5, 2006 Inter Press Service News Agency (IPS) story (Rome) written the day after the prime minister said he was resigning.

The resignation followed months of street protests, allegations of corruption, according to some reports, a dwindling of political capital among the country's political establishment, and most significantly, stiff resistance from opposition parties who boycotted an election called by the prime minister to consolidate his power. The boycott cleverly exploited a Thai election law that effectively robbed the prime minister of parliamentary control.

And the political stability promoted by the prime minister's former popularity instantly vanished. What now exists is a serious stalemate that observers predict will not be resolved anytime soon.

Where does this leave the Thai economy, and in particular Thai consumers?

While political instability does not necessarily doom the economic gains made by Thailand since the Asian financial crisis in the late 1990s, the fiscal engine that mitigated some of the damage of the 2004 tsunami-government spending along with subsidies for the rural poor-has been effectively stalled.

Large infrastructure programs scheduled for the coming months are almost certainly postponed. This may not be an entirely bad thing because some economists have raised questions about fiscal responsibility in connection with these projects.

Benefits to the country's consumers in the form of jobs and increased wages from the infrastructure projects will not be forthcoming.

More serious, will be a decline in consumer confidence if, as predicted, the political situation will not stabilize soon.

Factors likely to weigh against much economic damage include a predicted rise in Thailand's exports. According to an April 7, 2006 story in the International Herald Tribune (Neuilly Cedex), exports grew 18 percent during the first two months of 2006-compared with 15 percent in all of 2005, and 22 percent in 2004.

A story posted on the Asia Times Online (Hong Kong) website on March 30, 2006, termed exports "far and away the main engine of Thailand's economy."

The Tribune story said that the country's foreign currency reserves were now above us$50-billion, and that Thailand was recovering from the 2004 tsunami.

Other problems for consumers, though, include rising international oil prices. This not only makes transport more expensive, but also increases the cost to consumers of items that need transport such as food.

This means that inflation is becoming a concern, in spite of the fact that the government recently said core inflation would drop in the last half of 2006.

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