thai flag
An anti-government protester teaches a fellow protester how to wave a huge Thai flag on a barricade near the Government House in BangkokReuters

Thailand's currency and stocks suffered declines after the army imposed martial law in a bid to restore stability in the country following months of political turmoil.

The Thai baht declined as much as 32.52 against the US dollar before paring losses on suspected intervention by Thailand's central bank.

Meanwhile, the benchmark Stock Exchange of Thailand (SET) index is trading down 1.06% at 1,395.62 as at 9:04 am GMT.

The martial law will not help reverse the country's deteriorating economic growth, according to analysts.

"The imposition of martial law might be the necessary and sufficient step towards ending months of protracted political uncertainty, however it is unlikely to arrest a still-deteriorating economic outlook," said economists at ANZ Bank.

"The ceaseless downgrades to Thailand's growth prospects in recent months have merely been a function of a lacking functional government and constrained and ineffective fiscal policy.

"Martial law and pro-active fiscal policy have typically not wed well. Hence these developments do not alter a very weak economic outlook borne of political and fiscal ineffectiveness."

Army chief Prayuth Chan-ocha warned both supporters and opponents of ousted prime minister Yingluck Shinawatra not to hold any rallies.

In a televised address, Prayuth insisted this was not a coup but a move to restore peace and order in Thailand.

The interim government and the anti-government groups are convening separately to discuss the situation.

Following the development, Fitch Ratings said it is "keeping the situation under close review" even if the martial law is "not, in itself, negative for Thailand's ratings".