Thailand political unrest unleashes market turmoil

thai protests
Anti-government protests in Thailand have hurt the economy and roiled markets.

Escalating political tension and anti-government protests in Thailand have agitated financial markets and weakened the country's currency -- and there are few signs that the crisis will be easily resolved.

The Bangkok-based protests, which began months ago, have also increased the prospect of a wider clash that could affect other economies in Southeast Asia.

Thailand's benchmark stock index has plunged more than 12% over the past month. The Thai baht has plummeted to multi-year lows, dropping almost 6% against the U.S. dollar since the start of November. Exports have contracted, and the tourism industry -- which contributes about 7% or roughly $25 billion of the country's GDP -- is starting to take a hit.

Many countries have issued travel warnings for Thailand and at least one airline has canceled flights to Bangkok due to reduced demand.

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Ongoing political instability means market volatility will persist, according to Eurasia Group's Christian Lewis.

"Political developments will likely continue to hamper growth because of declining tourism revenue, lower tax revenues, and thus lower budget disbursements to provincial governments," Lewis said in a research note.

Other observers, including the Bank of Thailand, have dropped their economic growth forecasts. The central bank also cut rates at its November monetary policy meeting in a move to support growth.

So far, the rallies in Thailand have largely been peaceful and confined to the capital region, but scattered clashes have left at least five people dead and potentially hundreds more injured. Last month, Prime Minister Yingluck Shinawatra dissolved the country's parliament, and called for snap elections slated for Feb. 2 in efforts to ease unrest. Political tensions have yet to be resolved, and the protests have only intensified.

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The current round of protests were spurred by a failed attempt by the current government to pass an amnesty bill that would allow for former Prime Minister Thaksin Shinawatra -- the brother of the current prime minister -- to return to the country. Thaksin, a deeply polarizing figure, led the country from 2001 until 2006 when the military deposed him in a bloodless coup, and has been in living in exile as he faces a corruption conviction in Thailand.

--CNN's Pamela Boykoff and Jethro Mullen contributed to this report

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