PM Srettha’s removal would impact a range of key policies being implemented by the current administration
Thailand’s Constitutional Court is currently reviewing a legal case against Prime Minister Srettha Thavisin, seeking his removal due to the Cabinet appointment of Pichit Chuenban, a lawyer with a criminal record. The court is expected to deliver a verdict on August 14, 2024. If Srettha is found guilty, he and his entire Cabinet will be required to step down, necessitating the selection of a new prime minister and cabinet.
Business implications
Companies should exercise caution as they prepare for the coming months and quarters and use our scenario framework to inform internal communications and plans. There is a very strong chance that PM Srettha will be removed, as indicated by the 45% probability we have assigned to this scenario. Broadly speaking, the removal of Srettha and his cabinet would create major uncertainty in the government’s overall policy orientation, as well as the policies of key ministries, such as education, healthcare, and transport. It would also negatively impact consumer and investor sentiment, weighing to some degree on economic activity in the Thai economy.
In the short term, Srettha’s exit would most directly impact the digital cash handout program, the 2025 budget, and companies’ operations in Bangkok. Specifically, the PM’s removal would likely lead to the cancellation of the cash handout, which aims to provide $275 each to 50 million Thai citizens, beginning from Q4 2024. This would likely dampen consumer demand among low- and middle-income segments that are already becoming increasingly pessimistic amid the current political situation. Srettha’s removal could also yield changes in the 2025 budget. While the first draft passed a parliamentary vote in June, the budget must go through two additional rounds of approval before it is finalized, and a restructured government apparatus would likely consider changes to a range of allocations. The PM’s removal would also likely trigger major protests in Bangkok, disrupting business operations in the capital and negatively impacting tourism.
A new leadership would also have some long-term policy impacts on Thailand’s economy. The government would likely continue to implement minimum wage hikes over the next four years but reduce the rate of increase currently planned under Srettha’s administration. Leadership changes would also likely lead to the delay or cancellation of Srettha’s plan to bolster the tourism sector by potentially creating a six-nation visa pact with ASEAN peers.
Of course, not all policies would be impacted by the PM’s removal. Regardless of the outcome of the case, the government’s plan to increase minimum wages by the start of Q4 2024, provide subsidies to control inflation, and deliver financial support for farmers and small- and medium-sized enterprises will remain in place.
Our scenarios reflect the heightened uncertainty surrounding the outcome of the case against PM Srettha Thavisin
Given the major business implications of the case against PM Srettha, we have created the following scenarios to inform firms’ strategic planning:
Scenario 1: PM Srettha is ousted from government (45% probability) – We assign the highest probability to this scenario, as we believe there is a strong possibility that the court will rule against Srettha. This is largely due to the significant influence of the military on the court, which has historically ruled against the pro-democracy faction that Srettha represents. There is at least one instance where the court has removed a sitting prime minister for less consequential charges than those brought against Srettha.
Scenario 2: PM Srettha stays in power (40% probability) – We assign a slightly lower probability to this scenario as compared to Scenario 1. Since the State Council clarified that Pichit’s previous conviction and imprisonment no longer disqualifies him from holding a ministerial post, we believe there is a substantial chance that Srettha will be acquitted for appointing him.
Scenario 3: The case against PM Srettha drags on (15% probability) – We have also accounted for the low-probability scenario that the court delays its final verdict on the case, which is expected on August 14, 2024. The court has already postponed the proceedings once: the ethics case against PM Srettha was initially scheduled for July 10 but was later moved to July 24. Given the importance of the matter and the case’s potential impact, there is a chance of additional delays as the court reviews the evidence.
The low probabilities assigned to all these scenarios reflect the uncertainty surrounding the case’s outcome. We believe that the decision, which ultimately rests with the nine members of the Constitutional Court, could essentially go either way. Even when the court first received the case, it voted 6:3 in favor of reviewing it, indicating some internal divide on the matter.
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