(Bloomberg) -- Thailand’s Constitutional Court dismissed Prime Minister Srettha Thavisin from office after finding him guilty of an ethics violation, throwing the Southeast Asian nation into a fresh bout of political turmoil.
Srettha breached the provisions on integrity and ethical standards as mandated by the constitution by picking a tainted lawyer to be a cabinet minister in April, the nine-member court said during a read-out of the verdict on Wednesday. The judges voted 5 to 4 to dismiss Srettha and his cabinet. The court’s decisions are final and cannot be appealed.
Srettha’s Pheu Thai Party moved swiftly to pick Chaikasem Nitisiri, 75, as its new prime ministerial candidate, Thai-language newspaper Thairath reported. The 500-member elected House of Representatives is scheduled to hold a special session on Friday to choose a new leader.
The former property tycoon’s ouster risks political chaos in Thailand, where pro-royalist and conservative parties have jostled with pro-democracy groups for supremacy after a messy general election last year. Foreign investors have pulled money from the country, concerned by both political risk and the government’s failure to revive Southeast Asia’s second-largest economy after a decade of below 2% average annual growth.
Srettha, who was seen as a proxy for the influential Shinawatra clan that controls Pheu Thai, became prime minister after an agreement with the pro-establishment allies. The deal helped former leader Thaksin Shinawatra return to Thailand after 15 years in self-imposed exile. But Thaksin’s indictment in a royal defamation case in June, and now Srettha’s removal, signal the possible unraveling of that deal.
The verdict against Srettha came days after the same court dissolved the country’s top opposition party Move Forward, which won the the most number of seats in the 2023 election but was blocked from power.
‘Harsh Game’
“These two weeks have clearly shown that the establishment is playing the harsh game,” said Stithorn Thananithichot, director of the Office of Innovation for Democracy at King Prajadhipok’s Institute in Bangkok. “This doesn’t mean the deal is off, but this is meant to tighten the leash around Thaksin and Pheu Thai and push them into total submission.”
Srettha’s dismissal was in response to a petition by a group of former conservative senators who argued that Pichit Chuenban’s appointment as a minister violated the ethics rules. Pichit, a former lawyer representing Thaksin, was not qualified as he was jailed in 2008 for contempt of court following a bribery attempt, according to the petition.
Srettha said that he was saddened by the court decision and hoped the next premier will be selected soon by the parliament. The government’s dismissal will affect key economic policies, including a controversial $14 billion cash handout program to stimulate the economy, he said.
The nation’s benchmark stock index fell as much as 1.3% before trimming losses to close 0.4% lower. The baht pared gains after the ruling but closed 0.6% higher against the dollar.
“The decision won’t be taken well by markets given the rise in political uncertainty and the associated downside risks to growth stemming from potential unrest and delays to economic policy implementation,” said Krystal Tan, an economist at Australia & New Zealand Banking Group. “We need to see whether we end up with a prolonged political vacuum.”
Read: Thai Royalists Make Risky Bet in Fresh Showdown With Thaksin
Pheu Thai said it will soon hold talks with its partners to select a new prime minister while exploring the possibility of renominating Srettha. In a post on X, the party pledged to overcome the setback and work for a better life for all Thais.
Those eligible to become the new prime minister still include Thaksin’s 37-year-old daughter Paetongtarn Shinawatra. Anutin Charnvirakul, 57, of the second-biggest group Bhumjaithai Party is seen as another top contender. Prawit Wongsuwan, from military-backed Palang Pracharath, and Pirapan Salirathavibhaga from the royalist United Thai Nation, are other options from the conservative camp.
Economic Risks
Srettha’s ouster opens risks to economic growth, especially if political horse-trading among the coalition parties drag on and leave a potential power vacuum. Foreign investments may grind to a halt as markets await more clarity on who leads the nation. His tenure also marked a spat with the Bank of Thailand over its interest-rate path that spooked markets and raised doubts about central bank independence.
The turmoil could have adverse implications for fiscal policy and disrupt the passage of the budget for next year, according to Standard Chartered Bank Thai Pcl economist Tim Leelahaphan. The developments also further support the bank’s call for a December interest rate cut, he said in a note.
Foreign investors have pulled more than $3 billion from the nation’s stocks so far this year, with the benchmark SET Index of stocks ranking as one of the worst performers of all global bourses tracked by Bloomberg in the past year.
--With assistance from Pathom Sangwongwanich, Anuchit Nguyen, Eduard Gismatullin, Marcus Wong and Lee Miller.
(Updates with report of Pheu Thai picking its PM nominee in third paragraph.)
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