Atchana Waiquamdee, the BOT's assistant governor, said the central bank was studying how much new investment would be affected and how long it would be delayed as a result of the vacuum in government.

along with regular spending, such as wages would continue being disbursed as planned. The government could also rely on a carry-over budget.

Disbursements for capital projects are always low at the beginning of the fiscal year, which extends from October 1 to September 30, but it accelerates in the second and third quarters of the fiscal year, Atchana said.

"When the budget is not approved on time by Parliament in accordance with the Budget Act, it doesn't mean that everything is frozen. I saw the government disburse the 2006 budget rapidly in the first quarter of the fiscal

year after the [second] Thaksin government came into office," she said.

The Finance Ministry is likely to reduce this year's economic growth forecast from the current projection of between 4.5 and 5.5 per cent due to the delay in forming the new government, which will adversely affect budget disbursement for the next fiscal year.

The Election Commission (EC) and all political parties, with exception of the three main opposition parties, agreed to set a tentative election date for October 22. However, the EC's authority to set a tentative election date is in doubt because of a lack of quorum. Moreover, Thailand's three highest courts have all asked EC members to step down as the soon as possible.

Atchana said that even though the economy had slowed because of political instability and soaring oil prices, the country's unemployment rate has yet to increase significantly.

The unemployment rate in March stood at 1.8 per cent, lower than the 2.1 per cent in the corresponding period a year ago.

The central bank forecast that Thailand's economy would grow this year between 4.25 and 5.25 per cent.

It estimated that public consumption would grow 2-3 per cent this year and 3.5-4.5 per cent next year, while public investment was expected to expand 7-8 percent this year and accelerate 8-9 per cent next year.

Atchana said exports would remain the key engine driving economic growth this year, propelled by the improving global economy, and that private consumption and investment would grow moderately.

In addition, the consensus economic forecast for the world economy was been revised upward from the BOT's projection at the beginning of the year.

Japan predicts that its economy will be stronger than expected after the company has experienced inflation for the first time in years of deflation or stagnant prices. The Bank of Japan is expected to end its expansionary monetary policy and raise key interest rates soon.

BOT governor MR Pridiyathorn Devakula said on Tuesday that the country's competitiveness was in line with other countries, though the baht had strengthened more than other Asian currencies since the beginning of this year.

Earlier, the strengthened baht created worries among Thai exporters who have been afraid

of losing their competitiveness vis-à-vis countries with weaker currencies.

Anoma Srisukkasem

The Nation