Since the death of Thailand’s king Bhumibol Adulyadej last October, the accession to the throne for his son Vajiralongkorn has been smooth and characterised by actions to raise his authority. The king officially promulgated the new Constitution on April 6. After he earlier demanded a few amendments to assert his political role, notably in times of constitutional crisis, he is said to have taken control of existing royal agencies.    

Impact on country risk

The new king’s first moves indicate he is using the political transition to improve his future role under the military-drafted Constitution and assert his authority to the detriment of a still prominent military. In consequence, the longstanding tight collusion between the palace and military might give way to more conflictual ties and thus political instability in a divided Thai society, especially if he shows signs of support towards ex-PM Thaksin and his supporters. At the moment, general elections are expected to be held around mid-2018 with General Chan-O-cha as favourite to remain PM when power is transferred to an alleged civilian government. Political stability under the junta has allowed Thailand’s economy to keep growing at around 3% since 2015 and possibly until the next elections, driven by higher public infrastructure investments under the ongoing 8-year plan, exports and tourism receipts. Moreover, the high current account surplus and ample foreign exchange reserves prevent pressures on the baht. Sluggish domestic demand nevertheless explains this surplus as private consumption and investments suffer from high household debt, the late king’s mourning period and persistent political uncertainty. In fact, Thailand’s economic performances remain below potential and regional peers. All in all, Credendo expects unchanged political risk on the back of continued economic and political stability until the 2018 elections.

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