Thailand is back to the military rule after the PTP-led government was ousted and replaced by a ‘National Council for Peace and Order’ headed by Army Chief Prayuth Chan-ocha. He motivated the coup by the  need to restore peace and order, and sort out the political stalemate. A few days earlier, the martial law was imposed and a judicial coup hit PM Yingluck Shinawatra as the constitutional court urged her to step down for power abuse. After two days of failed negotiations between ‘yellow and red shirts’ (pro-government), General Prayuth seized power. Since then, Mrs Shinawatra and Mr Suthep (protest leader) have been detained and then released, a night curfew has been imposed, protests are forbidden, media censored and the constitution suspended. An interim PM (probably civilian) is to be appointed until political reforms are implemented, before returning to polls, most likely not within the next six months.

Impact on country risk

Thailand’s 12th military state coup obviously has a sense of déjà vu except that, compared to the last one in 2006, it is much more repressive, as democratic rights and mere civil liberties are severely constrained. Although it had claimed it would prefer not to intervene, the military junta took a rather abrupt decision, thereby showing the coup had presumably been premeditated but postponed due to intra-army divisions between those pro- and anti-government. After all, General Prayuth had been involved in the 2006 coup and 2010 violent army intervention against red shirts in Bangkok. The military aims to solve the 7-month political deadlock through constitutional reforms that should limit powers of the future elected government (and so harm the dominance of the Thaksin circle and PTP) to the benefit of unelected and pro- establishment institutions, in anticipation of the risky king succession that is likely in the coming years.
However, those events will only further deepen Thailand’s polarisation. While the opposition must be delighted by the judicial and military coup – backed by the popular king – which once again show that Thai institutions are on the elite’s and middle-class’ side, red shirts are determined to keep demanding elections. Though the situation in Bangkok is quite peaceful so far, there is a high risk of unrest and violent confrontations with the army and attacks against opposition and official targets, at least in northern and north-eastern provinces as the military is much present in Bangkok. Therefore, political uncertainty and instability risks will go on and continue to weigh on the economy and confidence with the threat of seeing investors moving away to more stable destinations. For the time being, unless the situation deteriorates further, Credendo Group’s short-term political risk classification remains unchanged, as last January’s downgrade reflected the impact of the political deadlock and the risk of a military coup.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com