The last time Thailand had a coup, the stock market crashed when the kingdom imposed draconian capital controls. This time around, investors hope the generals have learned their lesson.
Markets have largely taken last month’s military takeover in their stride, but there is still nervousness about a regime that has put the air force chief in charge of the economy and appointed the navy commander to oversee tourism.
Experts say the last putsch, in 2006, showed that soldiers lack the expertise to run Southeast Asia’s second-largest economy.
“The military government struggled to manage the economy, reflecting the lack of technocratic skills in economic management and administration,” said Rajiv Biswas, chief Asia economist at the IHS consultancy firm.
The regime was also unable to move ahead with significant reforms because of its caretaker status, he added.
After the 2006 coup, markets were particularly frightened by drastic foreign capital controls introduced several months later to try to curb the rise of the baht, said Ryan Aherin, Asia analyst at risk advisory company Maplecroft.
“The measure was very unpopular with investors,” he said.
The Thai stock market suffered a plunge of 15 percent in just one day before authorities quickly backtracked.
The regime also briefly considered limiting foreign investment in businesses.
By the time it abandoned the idea, “investor sentiment had already plummeted due to fears of nationalistic policies,” Aherin said.
So far, the Thai stock market is up about 4 percent since the May 22 coup, helped by buoyant global investment sentiment.
However, Japan, Thailand’s largest foreign investor, is watching events with trepidation.
Japanese auto giants Toyota, Honda Motor Corp and Nissan Motor Corp have invested heavily in Thailand, attracted by its skilled workforce and the ease of doing business.
Even before the coup, Thailand’s economy was reeling from nearly seven months of deadly street protests, which dented consumer confidence and scared off foreign tourists.
The economy shrank 2.1 percent quarter-on-quarter in the first three months of this year, according to an official estimate.
The fear is that it will contract again in the second quarter, sliding into recession.
“The economy is like a dying person — it’s sick so it needs oxygen,” Federation of Thai Industries vice chairman Tanit Sorat said.
Thai consumers appear relieved that the military takeover has, for now at least, brought a halt to the bloody political unrest.
Consumer confidence rose last month for the first time in 14 months, according to the University of the Thai Chamber of Commerce.
However, the government expects economic growth of just 1.5 to 2.5 percent for the year, against a previous forecast of 3 to 4 percent.
Thailand faces structural issues such as growing regional competition and delays in public infrastructure investments, Moody’s Investors Service analyst Steffen Dyck said.
After the last coup a strong global economy helped Thailand to post robust economic growth of about 5 percent in both 2006 and 2007, he said.
Seemingly aware of the investor nervousness, the junta has quickly invited various economic actors to make proposals for a “roadmap” out of the latest crisis.
“Using absolute power to solve economic, financial and fiscal problems is dangerous in the long run,” Thai army commander-in-chief Prayut Chan-ocha said in his weekly address to the nation on Friday.