BANGKOK (Reuters) -Thailand's parliament elected political neophyte Paetongtarn Shinawatra as its youngest prime minister on Friday, only a day after she was thrust into the spotlight amid an unrelenting power struggle between the country's warring elites.

The 37-year-old daughter of divisive political heavyweight Thaksin Shinawatra sailed through a house vote and now faces a baptism of fire, just two days after ally Srettha Thavisin was dismissed as premier by a judiciary central to Thailand's two decades of intermittent turmoil.

At stake for Paetongtarn could be the legacy and political future of the billionaire Shinawatra family, whose once unstoppable populist juggernaut suffered its first election defeat in over two decades last year, and had to do a deal with its bitter enemies in the military to form a government.

She will become Thailand's second female prime minister and the third Shinawatra to take the top job after aunt Yingluck Shinawatra, and father Thaksin, the country's most influential and polarising politician.

In her first media comments as prime minister-elect, Paetongtarn said she had been saddened and confused by Srettha's dismissal and decided it was time to step up.

"I talked to Srettha, my family and people in my party and decided it was about time to do something for the country and the party," she told reporters.

"I hope I can do my best to make the country go forward. That's what I'm trying to do. Today I'm honoured and I feel very happy."

Paetongtarn won easily with 319 votes, or nearly two-thirds of the house. Her response after winning was posting on Instagram a picture of her lunch - chicken rice - with the caption: "The first meal after listening to the vote."

ROLL OF THE DICE

Paetongtarn has never served in government and the decision to put her in play is a roll of the dice for Pheu Thai and its 75-year-old figurehead Thaksin.

She will immediately face challenges on multiple fronts, with the economy floundering, competition from a rival party growing, and Pheu Thai's popularity dwindling, having yet to deliver on its flagship cash handout programme worth 500 billion baht ($14.25 billion).

Thailand's benchmark index was up about 1.1% by 0900 GMT on Friday, having after lost nearly 9% this year.

"The Shinawatras' gambit here is risky," said Nattabhorn Buamahakul, Managing Partner at government affairs consultancy, Vero Advocacy.

"It puts Thaksin's daughter in the crosshairs and a vulnerable position."

The fall of Srettha after less than a year in office will be a stark reminder of the kind of hostility Paetongtarn could face, with Thailand trapped in a tumultuous cycle of coups and court rulings that have disbanded political parties and toppled multiple governments and prime ministers.

The Shinawatras and their business allies have borne the brunt of the crisis, which pits parties with mass appeal against a powerful nexus of conservatives, old money families and royalist generals with deep connections in key institutions.

HIGH STAKES FOR SHINAWATRAS

Nine days ago, the same court that dismissed Srettha over a cabinet appointment also dissolved the anti-establishment Move Forward Party - the 2023 election winner - over a campaign to amend a law against insulting the crown, which it said risked undermining the constitutional monarchy.

The hugely popular opposition, Pheu Thai's biggest challenger, has since regrouped under a new vehicle, People's Party.

The upheaval in the past few days also indicates a breakdown in a fragile truce struck between Thaksin and his rivals in the establishment and military old guard, which had enabled the tycoon's dramatic return from 15 years of self-exile in 2023 and ally Srettha to become premier the same day.

Thaksin's gamble on Paetongtarn at such a critical juncture surprised many analysts, who expected him to delay his dynasty and avoid exposing his daughter to the type of battles that led to the downfall of himself and sister Yingluck, who both fled overseas to avoid jail after their governments were ousted by the military.

"This is a big bet for Thaksin. There is a possibility for her to fail and that is a big risk for the entire Shinawatra dynasty," said Titipol Phakdeewanich, a political scientist at Ubon Ratchathani University.

"If she can't bring the economy back and bring the party back then it could be the end because the People's Party is gaining more momentum after their dissolution."

($1=35.1000 baht)

(Reporting by Panu Wongcha-um, Chayut Setboonsarng and Panarat Thepgumpanat; Writing by Martin Petty; Editing by John Mair and Miral Fahmy)

Paetongtarn Shinawatra elected youngest Thai PM, braces for baptism of fire

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