Thailand's Paetongtarn Shinawatra, who was dismissed as prime minister, leaving the Government House, after the Constitutional Court ruled to remove her from office, in Bangkok, Thailand, on Aug. 29, 2025.
Athit Perawongmetha | Reuters
More political and economic uncertainty, and even a coup, may be on the horizon for Thailand after the removal of Prime Minister Paetongtarn Shinawatra on Friday, analysts told CNBC.
She was dismissed on Friday for an ethics violation, following her suspension in July after a leaked phone call between her and former Cambodian Prime Minister Hun Sen emerged.
The phone call revealed she criticized a Thai military commander overseeing a border dispute with Cambodia while appearing to appease the Cambodian strongman.
Fighting erupted between Thailand and Cambodia in late July, although a ceasefire was reached five days into the conflict.
Chaos in Thailand
Joshua Kurlantzick, senior fellow for Southeast Asia and South Asia at the Council on Foreign Relations, told CNBC that there will be "chaos in the short term."
One possibility, he said, is that "Pheu Thai keeps it together and has a tiny majority in Parliament that could collapse at any time, with some kind of weak placeholder PM like Chaikasem Nitisiri," he added, referring to Paetongtarn's ruling Pheu Thai Party.
Nitisiri, who is also part of the Pheu Thai party, had run for the prime minister post in 2019 and 2023, having been Thailand's justice minister in 2013.
Another possibility, Kurlantzick said, is an "unwieldly coalition" formed by another party, such as the Bhumjaithai Party, counting on the support of the People's Party — formerly the Move Forward Party.
But he added that this "almost never works in any country, and probably wouldn't work in Thailand."
Early Monday, Reuters reported that the People's Party was due to meet to decide whom it will back to form the next government.
The Bhumjaithai Party had quit Paetongtarn's governing coalition on June 18, after the call with Hun Sen was revealed. Bhumjaithai's leader Anutin Charnvirakul was reported by Reuters to have shuttled between parties, offering pledges such as calling an election within four months.
However, analysts from Nomura said Charnvirakul has a lower chance of taking the prime minister spot than Nitisiri, pointing out that the Bhumjaithai Party has about 70 fewer seats in Parliament than Pheu Thai.
The analysts said if Nitisiri is elected, the status quo of the PT-led government will remain in place, but they also highlighted the risk of early elections being called in early 2026, because the ruling coalition commands a relatively small majority amid rising political uncertainty.
"Nonetheless, the elections, in our view, are unlikely to provide a permanent solution and may instead prolong political uncertainty further," Nomura added.
Coup on the horizon?
But that political weakness could raise the possibility of another military coup, Kurlantzick warned. The country experienced coups in 2006 and 2014.
The 2006 takeover ousted Paetongtarn's father Thaksin Shinawatra, and the 2014 coup followed the Constitutional Court's removal of Yingluck Shinawatra, Thaksin's sister.
Kurlantzick told CNBC that if Parliament collapses, a snap election will be called. The military does not want that, and neither does the king, in his view.
"In a free snap election, Move Forward, the progressive party devoted to military reform and reform of the monarchy, would have a very good chance of winning an absolute majority in Parliament and picking the PM. That would be a disaster for the military and palace," he said.
The Move Forward Party, under leader Pita Limjaroenrat, had won the most seats in the House of Representatives election in the 2023 general election, but was unable to form a government.
The party was dissolved by the Constitutional Court in August 2024, on grounds that it had violated the Constitution by proposing to amend Thailand's lèse-majesté law.
Kurlantzick said that "if Parliament falls, the military may feel that there is no other option than a coup," highlighting that Thailand has seen two coups since 2006. "It's a very real possibility."
His view is supported by a December 2024 paper by the Center for Strategic and International Studies, a Washington-based think tank, which said that Thailand's military, monarchy, and traditional elites view electoral democracy as a threat to their control.
"They see themselves as guardians of national stability, often viewing the largely rural, populist electorate as unprepared for informed political participation."
That, the paper added, "has fueled repeated military coups to dismantle democratic governments whenever they challenge the status quo, enabling elites to safeguard their power and shape politics to their advantage."
More economic uncertainty
On the economic front, political instability may be a drag on Thailand's efforts to revive its economy, which is grappling with tariffs from the Trump administration and one of the worst-performing markets in Asia. The SET index has fallen 11.7% in the year to date.
DBS Bank senior economist Radhika Rao said that growth for Thailand has been on the "softer side," but that the central bank is still expected to cut rates to support growth.
Speaking to CNBC's "Squawk Box Asia" on Monday, Rao said that Thailand could experience a slowdown in the second half of the year.
Nomura analysts forecast a gross domestic product growth of 1.8%, saying that the tariff impact in the second half will worsen the negative feedback loop between tight financial conditions and weak economic activity.
The 1.8% figure is in line with the World Bank's downgraded expectation in July. The World Bank had sharply cut Thailand's full-year growth forecast for 2025 to 1.8%, down from 2.9%, and also cut its 2026 projection to 1.7% from 2.7%. Thailand's economy grew 2.5% in 2024.
The political uncertainty and growth weakness have led Nomura's analysts to expect a sovereign credit rating downgrade in the coming quarters by Moody's.
In April, Moody's revised the rating outlook for Thailand to negative from stable, flagging rising political uncertainty and sustained growth weakness. Moody's sovereign credit rating for Thailand currently stands at Baa1.
English (US) · 