Tourism chiefs in Thailand wept into their Singha beers last week as army chief General Prayuth Chan-Ocha took control of the country and suspended the constitution, two days after declaring martial law.
For years, Thailand has been known as the "teflon economy" for its ability to shrug off political instability, but this time around, the economic backdrop to the military coup is considerably more downbeat than during previous coups.
During the day, before the 10pm curfew comes into force, Thais go about their normal business in Bangkok. Young women take "selfies" at the military roadblocks on the city's major intersections and an eerie normality prevails.
But the numbers tell a more depressing tale.
South-east Asia’s second-largest economy unexpectedly shrank in the first quarter from a year earlier, according to data issued last week, after anti-government protests that began in late October emptied hotels, scared off foreign investment and paralysed state spending.
Consumption fell 2.1 per cent, investment dropped 9.8 per cent, manufacturing declined 2.7 per cent and construction plummeted 12.4 per cent.
And look at how Thailand's neighbours are performing. Worst performing currency
Malaysia and Singapore experienced economic growth of at least 5 per cent annually during the same period. The country’s National Economic and Social Development Board forecast economic growth of between 1.5 per cent and 2.5 per cent this year, down from a previous forecast of between
3 and 4 per cent. Nomura is even more bearish, forecasting 1.1 per cent growth this year.
The Thai currency fell nearly half a percentage point after the coup was announced, and it has slipped by 4.5 per cent since the crisis began at the end of October last year, making the baht the worst performing currency in Asia.
Inflation reached a 13-month high of 2.45 per cent in April.
Thailand is one of the world’s most visited tourist destinations, with arrivals last year at 26.7 million, up 20 per cent from the previous year, worth €54 billion annually and accounting for about 20 per cent of GDP and responsible for 2.5 million jobs last year.
The first four months of the year have seen a 5 per cent drop in visitor numbers – 400,000 people fewer than last year. The country is gearing up for mass cancellations, and it could lead to a drop in up to 12 per cent in bookings this month, according to the Wall Street Journal.
That said, the flight from Changsha in Hunan province, China, was full with tourists taking advantage of plummeting prices to have a quick break.
Many countries have issued travel alerts. Irish tourists have been urged to exercise “extreme caution”. Hong Kong is halting tours to Thailand.
Many people do not feel the crisis in Thailand will affect the tourism industry. After all, we have been here before. Nearly every year.
What are interest rate swaps saying about the situation? According to analysis by Bloomberg, Thailand’s interest-rate swaps are signalling a cut in central bank borrowing costs to avert a recession after the coup.
The one-year onshore contract has fallen 19 basis points this month to 1.74 per cent as a court ousted Yingluck Shinawatra as prime minister on May 7th, martial law was declared last Tuesday and the military took control on Thursday. 'Prognosis good'
It is now 26 basis points below the 2 per cent benchmark interest rate after dropping to as low as 1.69 per cent on May 21st. Sharp declines in the swap preceded the last three rate cuts in March, November and May 2013.
This is the 12th coup since 1932, so there are few surprises for investors, even if things do look more intractable than in previous coups, and there are fears no lasting solution will come of it.
"We view the current military coup as likely overall positive as it creates a more stable environment," Mark Mobius of Templeton Emerging Markets Group, told Bloomberg. "The prognosis for Thailand is good."
