BANGKOK: The Thai King’s death saw a recovery in stocks on Friday that buckled during his final days, but analysts warned uncertainty over the nation’s future without its uniting figure posed fresh risks for an economy already battered by a decade of political turmoil.
King Bhumibol Adulyadej died at the age of 88 on Thursday, ending a seven-decade reign credited with bringing a measure of stability that allowed Thailand to go from agricultural backwater to one of the region’s most industrialized economies.
But a “lost decade” of political turbulence, including mass street protests punctuated by two military coups, turned a Southeast Asian star economy into one of its slowest-growing.
The military government that seized power in 2014 has reined in the damaging political turbulence but struggled to revive the lackluster economy, with tourism a lone bright spot.
There is a risk that the king’s death could see “political tensions flare up, triggering a slowdown in economic growth,” warned Capital Economics.
Market stability will be tied to a smooth royal succession, it said.
Crown Prince Maha Vajiralongkorn, however, was expected to be immediately named king, but he made a surprise request to delay the process, according to military junta leader Prayut Chan-O-Cha.
“All eyes now will turn to the succession process,” the researchers added.
The palace’s announcement that the king was gravely ill over the past week sent shudders through the stock market and pushed the baht to a two-month low.
But the main share index rose more than four percent Friday, with analysts saying it had been oversold amid anxiety over the king’s health, while the baht also staged a rebound against the dollar.
“The uncertainties and political risks have been more or less priced in,” Margaret Yang, an analyst at CMC Markets in Singapore, told Bloomberg News.
“We may still see some panic selling but I don’t expect this to last for very long. Eventually smart money will flow in to support the market.”
However, experts warned that the longer-term picture is less certain as Thailand remains a deeply polarized country with the recent stability a result of strict military bans on political activities and dissent.
Bower Group Asia, a business consultancy, said these latent conflicts are likely to reemerge if and when the military decides to hold promised elections, currently scheduled for late 2017.
According to government figures, the economy grew 2.8 percent last year following record tourist arrivals and a ramp-up in infrastructure spending by the junta-led government.
But while that is three times quicker than in 2014—when protests and the coup tripped up the economy — it is still a lot slower than the 6.5 percent seen in 2012.
There is also concern about the immediate impact on the key tourism sector during the mourning period after the government asked the public “to refrain from holding entertainment activities for one month”.
The tropical kingdom’s notoriously rowdy nightlife, red-light districts and beach partying on its southern islands are top draws for a tourism industry that has kept the economy afloat as other sectors fell flat.
“Widespread closures of domestic businesses for several days are likely to occur, including many tourism companies,” said Economist Intelligence Unit.
It added that it expected a slowdown over the next 12 months.
“Consumer demand will fall sharply in the coming weeks,” it said.
Bangkok clubs shut down Thursday after news of the king’s passing, though most other businesses opened as normal the next morning.