The suspension of Prime Minister Prayut Chan-o-cha’s powers by the Constitutional Court is seen denting investor confidence at a time the nation has been actively wooing overseas investors, though the direct economic impact is likely to be muted, according to analysts.
Political risks may delay investment decisions by companies that were planning to move production facilities to Thailand, according to Amonthep Chawla, head of research at CIMB Thai Bank. The uncertainty creates a disadvantage against nearby countries such as Vietnam, he said.
The ruling on Gen Prayut sent stocks and the currency down briefly before they rebounded. While the market was “slightly spooked” by the news, calm returned as investors bet the government will continue as normal, according to Tim Leelahaphan, an economist at Standard Chartered Bank.
Better-than-expected rebounds in tourism and domestic demand will underpin the economic recovery, which isn’t likely to lose momentum unless political unrest mounts and protests turn violent, Mr Amonthep said.
“Rising political risk may affect foreign investors confidence,” Mr Amonthep said. “But the direct impact to economy may be limited as the budget bill already passed.”