FORTUNE — Last Wednesday, Yingluck Shinawatra lost her job as Prime Minister in Thailand. She was removed by the country’s Constitutional Court, which ruled she had abused power in 2011 when she transferred a civil servant to a different post.
On Thursday, lest the prospects for Yingluck’s political future not be clear, Thailand’s National Anti-Corruption Court separately indicted and recommended impeachment proceedings against the ousted Prime Minister for her role in a national rice subsidy program. As a result, Yingluck may face up to a five-year ban from politics and criminal charges.
Dramatic as these developments may seem, for those who follow Thai politics none of this is shocking. For months, anti-government protestors have been baying in the streets for Yingluck’s government to be gone. (When they had a chance to vote her out in February, they boycotted the election because they had no chance of winning it.)
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Thailand’s courts, the realm of the country’s elites, are notoriously stacked against Yingluck’s party, and two lower courts had already made similar rulings about the 2011 personnel transfer. The Constitutional Court’s verdict brought the “judicial coup” many had been expecting and simply sets the stage for the next chapter of grinding political conflict that has gripped Thailand ever since Yingluck’s brother Thaksin was in power. (Thaksin was the last of Thai leaders to be ousted the old-school way, by military coup in 2006.)
Surprising, no. But troubling for Thailand’s economy? Increasingly, yes.
Late last year as protests and street violence ramped up in Bangkok for the umpteenth time, I wrote about Thailand’s record of economic resilience (and why this wave was unlikely to harm the economy). Through bloodshed, business district shutdowns, and coups the Thai economy — the second-largest in Southeast Asia behind Indonesia — has soldiered on in recent years, suffering barely a dent.
Foreign companies, particularly automotive and electronics makers like Toyota
, and Seagate
have continued to invest in major manufacturing plants in the country. Tourists, lifeblood in a country that drew 9% of GDP from the industry in 2013, according to the World Travel & Tourism Council, have continued to flock to Thailand’s beaches, mountains, and that political hot zone: Bangkok. The filming of Hangover II in the capital city went on as planned, and MasterCard even named Bangkok the top global destination in 2013.
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Still, there are signs that “Teflon Thailand” — which is already in a fragile place due to recent slumps in manufacturing, exports, and consumer confidence — may not be able to shake the political uncertainty much longer.
Moody’s responded to Yingluck’s ouster by declaring Thailand “credit-negative, and GDP growth forecasts for 2014 have been in free fall since December.
Credit Suisse has revised its 4.5% GDP growth rate down 2%, conditioned on the iffy prospect that Thailand has a “functioning government” by the third quarter. Bank of America
forecasts “no government and 1.1% GDP growth.”
Indeed, there’s not much faith Thailand can get its political house in order, and after Yingluck’s ouster, there’s genuine concern the situation has gotten far more combustible.
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For now, much of Yingluck’s government is still in place — she has simply been replaced by a deputy prime minister and one of her brother’s former business cronies, Niwattumrong Boonsongpaisan — a situation that is hardly more tenable to the anti-government movement. Protesters returned to Bangkok’s streets on Friday, claiming to make, not for the first time, “their final push” against the powers that be.
Yingluck’s supporters have also mobilized to protest the court’s decision. While leaders in the protest movement have called for restrained and peaceful demonstrations, “red-shirt” supporters of the government have been rallying in the provinces, burning the mock coffins of Constitutional Court members.
Elections have been tentatively set for July, though many question that they will happen. Anti-government protestors, who align with the Democrat party, will have no better shot at winning than when they boycotted elections earlier this year (their proposed solution: appointing an interim “people’s government”).
The lack of an obvious way out has many fearing the only outcome will be violence — and that seems to be worrying investors and the business community more than it has in the past.
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In January, Toyota warned Thailand’s crisis could jeopardize further investment in the country, and in April, Honda
announced that it would be holding off on planned construction of a $530 million manufacturing facility in Thailand for at least six months.
Credit Suisse analyst Santitarn Sathriraithai, in a February analyst note, predicted tourism would be hit harder this go-round, too. One reason: the growing number of tourists from Mainland China — who now represent 20% of Thailand’s visitors, up from 8-9% a few years ago — who tend to be more sensitive to political events. This year’s “Visit Malaysia Year” campaign will also likely eat into Thailand’s tourism numbers.
It’s too early to tell just how much economic fallout Thailand will really feel from Yingluck’s ouster and what follows, but there will be sure winners: By Sathriraithai’s analysis, when Thailand’s politics head way south, so do the tourists. While Thailand’s upheaval is unlikely to benefit any domestic political party or reform agenda, Malaysia and Indonesia are sure to see more visitors. Their tourism numbers tend to shoot up when Thailand’s in crisis.