After four long years of military rule, the announcement of elections on February 24 of next year have rekindled a sense of hope among Thailand's democrats.
Make no mistake, the ruling junta, led by ex-army chief and current premier Prayuth Chan-ocha, will fight hard to retain power. The generals have had time skew the political system in their favour so that the military will retain undue influence in the upper house of parliament; and they are taking a leaf out of the populist playbook by promising pre-election handouts to millions of poorer Thais. Even so, it appears likely that the Pheu Thai party, which remains the overwhelming choice in rural areas and is still directed from exile by former prime minister Thaksin Shinawatra, will win a majority in the lower house. If it teams up with the Democrats it could form a coalition government and move the country back to something resembling genuine democracy.
That is welcome news, of course, though foreign investors will remain wary of the riots and political chaos that marred the last time that Pheu Thai and the Shinawatras were in charge. Secretly, many might prefer a continuation of the junta's stable rule, even if it has been accompanied by significant repression and mass arrests of activists, journalists and academics.
In reality, who runs the country matters little - at least in economic terms. Thailand's future growth depends to a large extent on exports to China and China is slowing down. Exports of goods -- from cars and car parts to electronics and processed foods -- are equivalent to more than half of GDP. Almost a fifth of those exports go to China (including Hong Kong) and growth in these shipments slowed from double digits to 5.7% in the third quarter, the slowest pace since 2016. With our researchers predicting that the Chinese economy will continue to slow next year, even if the trade dispute with the US does not get worse, pressure on Thai exports will only increase.
Meanwhile, household spending is likely to remain stable at best given high debt levels and the fact that the country's still-young society (average age: 38) is ageing rapidly. Business investment has been disappointing and the government's ambitious plans for insfrastructure spending are behind schedule. Both may be further affected by uncertainty around the election. That leaves tourism and while this sector has continued to boom -- interrupted only briefly by July's ferry disaster -- it is volatile and hard to see how much more it can expand.
The gloom should not be overdone. Thailand remains a highly competitive exporter and is part of the rapidly growing ASEAN region. Many foreign companies, led by the Japanese car makers, continue to invest. And a better political outlook could encourage domestic businesses to start spending more.
Still, economic growth has remained stuck below 4% for most of the past decade -- at a time when Indonesia and Malaysia are growing by more than 5% and Vietnam, the Phillipines and some of the smaller south-east Asian nations by over 6%. This year was supposed to break the 4% ceiling and send Thailand onto a higher trajectory. Given the growing drag from China, this is now looking less and less likely.