Thailand's military coup may not entail long-term financial crisis

Thailand's unexpected overnight military coup rattled Asian financial markets last Wednesday and pressured the Thai baht and other regional currencies, though its economic repercussions remained unclear.

The news prompted Fitch Ratings to say it was considering lowering the credit rating of the country's sovereign debt and seven major Thai banks. Standard & Poor's Ratings Services said it was putting six major Thai companies, including Thai Oil Public Co., on negative watch.

But some analysts predicted that the coup's impact may be limited and possibly even help end Thailand's political crisis, which has dragged on for months."We think overnight developments in Thailand probably set up a net reduction in political uncertainty and could enable a speedier resumption of decisive governance," Michael Kurtz, a regional economist for Bear Stearns, said in a report issued last Wednesday.

In the country's first coup in 15 years, Thai Army chief General Sondhi Boonyaratklin led a bloodless, well-orchestrated overthrow while Prime Minister Thaksin Shinawatra was attending the U.N. General Assembly in New York. Sondhi told a news conference that he would act as a prime minister until a new leader is named and a new, temporary constitution enacted. A general election will be held by October 2007, he said.

The International Monetary Fund, which bailed Thailand and some of its neighbors out of a financial crisis in the late 1990s, was closely watching the situation but believed the region would be little affected, said the IMF's chief, Rodrigo de Rato. "Thailand's economy is fundamentally strong," de Rato said.

Although Bangkok was calm, regional financial markets were roiled, and analysts said the Thai currency was likely to remain under pressure until the political chaos ends. Thailand's financial markets were closed after the coup leaders declared a holiday and put the country under martial law.

Source: wtopnews





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