Confidence among Thai industrialists slumped last month as businesses feared for their competitiveness because of operating costs, oil prices, interest rates and the high value of the baht.

The Industrial Confidence Index for April fell sharply to 94.5 points, from 108.5 in March, marking the first time this year that it fell below 100.

The index confirmed that the political crisis started affecting the business sector last month.

"The low industrial confidence figures showed that industrialists started to feel the impact of the plunging economy," said Santi Vilassakdanon, chairman of the Federation of Thai Industries (FTI), which conducted the study.

Last month, the price of diesel, which is vital to many manufacturers and the transportation sector, escalated and the government's and Parliament's work has hit an impasse.

Rising interest rates are also harming consumer confidence, Santi added.

"Most businesses agreed that the government should step in to help small and medium-sized enterprises, in terms of financing and marketing, as well address the oil price, the baht's value and interest rates to increase Thai competitiveness," Santi said. Competitiveness is one of Santi's main focuses in his new role as FTI chairman.

The index was published yesterday, a day after the Finance Ministry revised downward its economic growth forecast for this year by 0.5 per cent to 4-5 per cent.

Yesterday the Thai Chamber of Commerce's issued its latest growth forecast, which it had downgraded to less than 4 per cent.

The trade group predicted that economic growth would be 3.5 to 4 per cent, down from 4.2 per cent due to factors like the lack of state investment projects.

Caretaker Deputy Prime Minister Wissanu Krea-ngam said ministers and agencies, including the National Economic and Social Development Board, would discuss ways to stimulate the economy this Friday.

At another meeting this week they discussed strategies to pool government deposits into a fund and asking the Bank for Agriculture and farming cooperatives to extend more loans to the poor to help them cope with economic problems.

It is now unclear if the Bank of Thailand will raise its benchmark rate again on June 7, to bridge the gap between US and Thai rates.

Caretaker Finance Minister Thanong Bidaya, who recently said the BOT did not need to follow the US Federal Reserve's move because of the Kingdom's domestic situation, yesterday said he would not intervene in the central bank's rate decision.

Transportation companies have also raised fares to cover rising petrol and diesel prices.

Suchinda Cherdchai, chairman of the association of bus operators, said fares would be maintained until the end of June but today she will ask to raise them by 9 satang per kilometre in July.

"The government's diesel subsidies for bus operators have not resulted in concrete benefits and letting the fares reflect the true cost would be the best way to address the problem," she said.

Aat Pisanwanich, director of the Centre for International Trade, yesterday said considering the political problems and a slowing world economy, Thailand would probably miss its GDP growth target.

"Certainly, mega-projects have to be suspended until the new government is in office," said Aat.

If launched as planned, investment in the mega-projects could boost GDP by 0.7 per cent.

In addition, the government recently reduced its 2006 forecast for industrial manufacturing growth to 5.4 per cent from 6.2 per cent, meaning the value of industrial growth would be Bt1.5 trillion, rather than Bt1.6 trillion, he said.

"The stronger baht and higher manufacturing and transportation costs will reduce the competitiveness of domestic industrialists," Aat said.

The textile, agriculture, fisheries and leather sectors will probably be hit by these factors, he said.

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