The court-ordered removal of Prime Minister Yingluck Shinawatra on the grounds of abuse of power proved to be the final nail in the coffin for the troubled PTP government that came to power on a wave of popular optimism in 2011. Growing street protests and clashes between the red-shirted supporters of the PTP (and exiled former Prime Minister Thaksin Shinawatra) and their yellow-shirted opponents threatened to trigger an escalating cycle of violence.

In turn, the military seized political control for the second time in eight years. This move has thrown the near-term direction of economic policy and the prospects for longer-term political stability into uncertainty.

The fact that the coup barely registered in the currency and stock markets highlights the degree to which investors have become inured to instability in Thailand. Military intervention has restored calm to Bangkok’s streets, and investors can at least count on a more efficient policy-making environment than the Yingluck administration could guarantee, given the constraints imposed by the PTP government’s caretaker status.

Gen. Prayuth Chan-ocha is promising to carry through the government’s planned infrastructure improvements, and he has also pledged to deliver up to $3 billion owed to rice farmers under a controversial subsidy scheme launched by the PTP administration, although there are questions with regard to financing the payments, given the huge losses incurred by the government on the subsidized contracts.

A caretaker administration is to be formed by September. But fresh elections will await an overhaul of the constitution, which undoubtedly will include steps to neutralize the political influence of Thaksin’s allies to the benefit of the main opposition Democratic Party.

The fact that there will be further negatives is underlined by the flight of some 180,000 Cambodian migrant workers back to their homeland in anticipation of a crackdown on unregistered employment. This development points to problems for industries, notably, agriculture, that rely on informal labor.

The transition process is also likely to be troubled by a battle for control of the country’s state-owned enterprises. Although the military has stopped short of deposing chief executives, growing pressure on company boards has seen several resignations lately, including heads of the oil and gas company, PTT, Krung Thai Bank, and the state lottery. Anecdotal evidence suggests that company directors are no longer guaranteed liability insurance.

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