Thailand one year later: Stable but stuck?

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One year after Thailand's latest coup, the country's usually fraught politics may have stabilized, but investors are holding back amid uncertainty over when the military junta might relinquish power.

"Political stability at the moment, compared with, say, last year, is better," Prasarn Trairatvorakul, governor of the Bank of Thailand, told CNBC. "But looking further [ahead], certainly people want more continuity. They want a political system to come to a model that people are more familiar with."

In May 2014, after more than seven months of political protests against the democratically elected government, Thailand's army chief, General Prayuth Chan-ocha, declared the military had seized power in a coup and later declared himself prime minister. The timeline for a return to democratic elections has been pushed back repeatedly and now don't appear likely before the tail-end of 2016, if the country approves the draft constitution in a referendum planned for January.

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Prasarn isn't concerned about the delay.

"That doesn't make much difference in terms of time frame," he said. "You'd rather have something more acceptable, sustainable. It's much better than something [where] people will quarrel and be divisive."

Of course, if the country rejects the constitutional rewrite – which appears aimed at ensuring the Shinawatra family, which has produced two prime ministers who were unseated in military coups – elections likely wouldn't be held before the latter end of 2017, at the earliest, analysts said.

"The delay in the general election is bad news for the market, although it is a win-win situation for the government," as no matter the referendum's outcome, it will stay in power longer, Kasem Prunratanamala, an analyst at CIMB, said in a note Wednesday. He expects that even if the referendum is approved, the new constitution's call for a non-elected prime minister is likely to mean Prayuth will return as the government leader.

"Some may think that with the government in power for a longer term, there would be more continuity in terms of policy and infrastructure spending. But it has been a year since the coup, and we have yet to see much infrastructure spending," Kasem said, calling the military government's performance "poor."

Indeed, disenfranchising the poor, who swept the previous government to power, hasn't done much for Thailand's economy.

In the first quarter of this year, the economy grew a seasonally adjusted 0.3 percent from the previous quarter, above expectations for a contraction, but analysts said that was due to revising the October-December period's figures lower.

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"History shows that having a government in place that is fully elected, focused on macro-managing the economy and really trying to boost efficiency in the economy typically works best," Rob Subbaraman, chief economist for Asia at Nomura, told CNBC. Nomura has cut its 2015 economic growth forecast to 2.7 percent form 3.3 percent, well below the Bank of Thailand's 3.8 percent forecast, he said. "The problem with the current situation is the focus is very much on political reforms," Subbaraman said, adding the country also faces several potential flashpoints, including the referendum and the trial of former Prime Minister Yingluck Shinawatra for negligence.

"It's weighing on private investment and then when the government is so involved with dealing with these issues, it's hard for them to focus on public infrastructure as well," he said.

Others agree that politics is holding the country back.

Thai soldiers parade during celebrations of the Royal Thai Armed Forces Day at a military base in Bangkok, Thailand on January 18, 2015
Stephen J. Boitano | LightRocket | Getty Images

"Firms are keeping investment plans on hold while the political situation remains unclear," Krystal Tan, an Asia economist at Capital Economics, said in a note Thursday. "Meanwhile consumer sentiment remains weak. Given its fragile state, Thailand's economy can ill-afford a prolonged period of political uncertainty."

To be sure, some companies have responded positively to the junta's moves to keep the peace.

The coup had "no affect whatsoever" on business, Richard Han, CEO of Hana Microelectronics, told CNBC." In fact, last year was a very strong year for us. We welcomed the stability that clearly was needed with all the troubles and the protests leading up to the coup," he said, noting that prior to the military seizing power, many of his customers had been banned from traveling to Thailand.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1