BANGKOK —
Thailand's financial and stock markets reacted cautiously Friday, a day after the Thai army overthrew the caretaker government after months of political conflict.
Economists remain cautiously upbeat, hoping longer term growth can be revived if political stability returns.
The Thai economy is facing recession after months of protests, failed elections in February and political violence that has claimed almost 30 lives and left hundreds injured.
A state economic think tank reported the economy shrank by more than two per cent in the first quarter of the year from the last three months of 2013 as the conflict took its toll on investor and consumer confidence.
Thanavath Phonuchai, director of the Thai Chamber of Commerce University, said the challenge for Thailand is to move toward longer term economic stability.
"In Thailand right now the big question is how can the Thai economy grow in the sustainable path," he said. "It's a very important question.
"This coup should make the Thai political situation in the future more stable in the long run," he said. "It's quite hard for Thai people and Thai society to get a good solution for Thai politics. So if we have a stable political situation it will support Thai economic growth in the long run."
Thailand has been without a formal government since December.
The absence of a seated parliament prevents substantial budget planning and spending to go ahead.
Government spending, a key economic driver, has fallen 20 percent and private spending has also been weak.
Analysts say foreign investors are also looking to other potential regional bases, including the Philippines and Indonesia, which have been more politically stable in recent years.
Greg Wallis, a senior Australian Trade Commissioner in Thailand, said foreign business people looking to travel and invest in Thailand may assess plans given the uncertainties.
"What it comes down to is whether the short term concerns that people might have about whether they would travel here for events and business meetings they'll make decisions on those," he said.
"And the other aspect of course is whether companies will assess their long term plans for Thailand and make positive or negative assessments based on what happens," Wallis said.
Thailand's travel and tourism industry is also under pressure.
The military's move earlier in the week to implement martial law can impact travel and commercial insurance policies and agreements.
Some 40 countries have issued travel warnings over travel to Thailand in recent months amid the political conflict.
On Friday, the Hong Kong Industry Council announced a "red travel" alert resulting in the cancellation of all group tours to Thailand. Singapore's foreign ministry has also advised its citizens to seriously reconsider travel to Thailand.
Laurent Kuenzle, chief executive officer for Asian Trails travel group, said although tours and travel were operating normally, the outlook remains uncertain.
"We were able to run all our transfers without any problem to and from all airports in Thailand, so actually operations are all as of normal," he said. "What the impact will be from cancellations we have no idea at this present time. It's really difficult to anticipate what will happen."
Overall tourism numbers are marginally down across the country.
The Thai hotels association is reporting heavy cancellations, especially affecting Bangkok.
Economists remain cautiously upbeat, hoping longer term growth can be revived if political stability returns.
The Thai economy is facing recession after months of protests, failed elections in February and political violence that has claimed almost 30 lives and left hundreds injured.
A state economic think tank reported the economy shrank by more than two per cent in the first quarter of the year from the last three months of 2013 as the conflict took its toll on investor and consumer confidence.
Thanavath Phonuchai, director of the Thai Chamber of Commerce University, said the challenge for Thailand is to move toward longer term economic stability.
"In Thailand right now the big question is how can the Thai economy grow in the sustainable path," he said. "It's a very important question.
"This coup should make the Thai political situation in the future more stable in the long run," he said. "It's quite hard for Thai people and Thai society to get a good solution for Thai politics. So if we have a stable political situation it will support Thai economic growth in the long run."
Thailand has been without a formal government since December.
The absence of a seated parliament prevents substantial budget planning and spending to go ahead.
Government spending, a key economic driver, has fallen 20 percent and private spending has also been weak.
Analysts say foreign investors are also looking to other potential regional bases, including the Philippines and Indonesia, which have been more politically stable in recent years.
Greg Wallis, a senior Australian Trade Commissioner in Thailand, said foreign business people looking to travel and invest in Thailand may assess plans given the uncertainties.
"What it comes down to is whether the short term concerns that people might have about whether they would travel here for events and business meetings they'll make decisions on those," he said.
"And the other aspect of course is whether companies will assess their long term plans for Thailand and make positive or negative assessments based on what happens," Wallis said.
Thailand's travel and tourism industry is also under pressure.
The military's move earlier in the week to implement martial law can impact travel and commercial insurance policies and agreements.
Some 40 countries have issued travel warnings over travel to Thailand in recent months amid the political conflict.
On Friday, the Hong Kong Industry Council announced a "red travel" alert resulting in the cancellation of all group tours to Thailand. Singapore's foreign ministry has also advised its citizens to seriously reconsider travel to Thailand.
Laurent Kuenzle, chief executive officer for Asian Trails travel group, said although tours and travel were operating normally, the outlook remains uncertain.
"We were able to run all our transfers without any problem to and from all airports in Thailand, so actually operations are all as of normal," he said. "What the impact will be from cancellations we have no idea at this present time. It's really difficult to anticipate what will happen."
Overall tourism numbers are marginally down across the country.
The Thai hotels association is reporting heavy cancellations, especially affecting Bangkok.
