By Kathleen Caulderwood - Economists say the Thai military coup may not bode well for long-term economic prospects and the lucrative tourism industry, but could help stabilize the markets, at least for now.
“The coup reduces uncertainty about the immediate outlook and, in particular the possibility that the political standoff would turn much more violent,” wrote Mark Williams, Chief Asia Economist at Capital Economics, in a note on Thursday. “For these reasons it could actually be positive for both Thailand’s economy and financial markets in the near term," they said.
After six months of political gridlock, including the dissolution of parliament in December and ongoing, increasingly violent street protests, Army General Prayuth Chan-Ocha announced on Thursday that the army had taken over “in order to bring the situation back to normal quickly,” and “reform the political structure, the economy and the society,” according to The New York Times.
The Thai economy is already under strain. Thailand’s first-quarter GDP contracted 0.6 percent from a year earlier, as the National Economic and Social Development Board reported on Monday.
But Following Prayuth’s announcement on Thursday, the Thai baht weakened just 0.3 percent against the dollar, which Williams wrote is thanks to the idea of a very relative stability, though the long-term outlook isn’t as bright.
“The imposition of martial law in effect implies that a properly functioning government does not look imminent, thus highlighting the continued vulnerability of the economy,” wrote economic analysts from Nomura, in a Thursday note, where they reiterated a weak GDP growth forecast of 1.1 percent
“The situation remains fluid,” they wrote, adding that the recent events will only add to an already weak growth outlook, “which has suffered due to a lack of government spending on much needed infrastructure, as well as weakening private sector sentiment, is likely to remain weak.”
“Prayuth’s move was unexpectedly severe, effectively tearing up a Constitution he helped to write in 2007,” wrote Christian Lewis and Shaun Levine, Asia analysts at the Eurasia Group, in a note on Thursday.
They expect to see a strong backlash from pro-Thaskin supporters, which will likely raise chances of further street violence as Prayuth cracks down.
“It will be several days before governance plans materialize, as street-level security under martial law will remain the top concern. But we don’t see last night’s coup as marking the end to a period of political instability,” they wrote.