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Thailand aims to revive economy after protests end
Wed Apr 15, 2009 2:59am EDT
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By Alan Raybould
BANGKOK (Reuters) - The Thai government considered new measures to revive the economy on Wednesday, a day after the end of violent protests that further dented confidence in a country heading into recession.
A state of emergency imposed in the capital on Sunday remained in place and security forces tightly guarded the area around the prime minister's office, the epicenter of protests the past three weeks.
Finance Minister Korn Chatikavanij told the Financial Times that Thailand may expand its stimulus package and increase borrowing to boost confidence and deal with the economic costs of political turmoil.
"We were already anticipating revenue shortfalls in the current fiscal year and that shortfall is almost certainly going to be larger now as a result of what happened over the last 72 hours and so we are going to have to make sure we have sufficient fiscal space," he said in an interview.
Regardless of whatever fiscal measures the government may adopt, few believe the end of this round of protests heralds a sustainable return of stability to Thailand's politics.
Prime Minister Abhisit Vejjajiva's position has been strengthened, but opposition to him remains strong and the "red shirt" protesters have vowed to return even though some of their leaders have been arrested.
Financial markets were closed for the three-day Thai New Year holiday, but will reopen on Thursday. Shares and the baht were expected to come under selling pressure.
Tisco Securities strategist Viwat Techapoonphol expected foreign selling to lop between 3 and 5 percent off the main Thai stock index, which has failed to join in the rally on other bourses in recent weeks due to the political crisis.
"Selling pressure will come from foreign funds constrained by their policy of not investing in countries where there is a state of emergency in place," he said.
The locally-driven bond market would be "influenced positively" by the developments, said Edward Lee, regional head of fixed income strategy for Asia at Standard Chartered Bank.
Thailand's five-year CDS narrowed to 205/220 bps from 210/230 on Tuesday, but sentiment remains fragile after the finance minister's comments.
Moody's and Standard & Poor's, which already have a negative outlook for Thailand's sovereign ratings, said on Monday that renewed political unrest this week had increased the risk of a sovereign downgrade.
Though markets will open, the government has extended the New Year holiday the rest of the week to control the flow of people back into Bangkok, because some protesters may come in from the countryside in a mood to fight, authorities said.
ARREST WARRANTS
Police said arrest warrants had been issued for former Prime Minister Thaksin Shinawatra, the exiled figurehead of the "red shirt" protest movement, and 13 leaders of the United Front for Democracy against Dictatorship (UDD) for violating state of emergency regulations. At least three were already in custody. Continued...
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