The Bank of Thailand  is likely to downgrade its growth forecast for this year from the current 4.25-5.25 per cent, due mainly to the political turmoil, while the private sector is losing confidence from the political impact on the economy.

Senior director Suchada Kirakul explained that a downgrade was likely, because the government's budget disbursement was expected to be delayed nine months, not six months as anticipated earlier.

However, she did not elaborate on how much the BOT would cut its forecast for growth in gross domestic product.

The statement was in line with the private sector view on the economy.

Bangkok Bank (BBL) senior executive vice president Deja Tulanunt said yesterday the political uncertainties and a slowdown in exports had put the brakes on economic growth for this year. The bank projected that the Thai economy would expand only 3.5-4 per cent in the second half of the year.

However, Finance Ministry spokesman Somchai Sujjapongse told a press conference yesterday the Thai economy should expand 4-5 per cent, as expected. He noted that higher interest rates and oil prices had had a lower-than-expected impact on the investment and industrial sectors.

The University of the Thai Chamber of Commerce predicted yesterday that largely due to political instability, this year's economic growth might be only 3.8-4 per cent, the lowest since 2001, when the country's GDP was 2.2 per cent.

The lower growth predictions was a result of forecasts that economic growth for the remaining two quarters could be lower than 3 per cent, also the lowest in five years.

Economics and Business Forecasting Centre director Thanawat Polwichai said the fourth quarter would be the worst for economic expansion, at 2.3 to 2.8 per cent. In the third quarter, economic expansion would not exceed 3.3 per cent, he said.

The university lowered its economic growth prediction after the Constitution Court began investigating allegations that may lead to the dissolution of two large political parties: Thai Rak Thai and the Democrats.

Political instability, rising oil prices, high interest rates and fluctuations in the exchange rate are key negative factors slowing economic growth.

Based on 400 responses to a survey of various enterprises conducted on Tuesday and Wednesday, the university said the impact of the Thai Rak Thai Party's dissolution would dampen economic growth. Sixty-five per cent of respondents said the economy would be even worse if both Thai Rak Thai and the Democrats were dissolved.

 Meanwhile, Thai Chamber of Commerce (TCC) deputy secretary-general Pornsilp Patcharintanakul said top executives of the private sector would like the Constitution Court to complete its deliberations within half a month.

They voiced concern that should the court spend too much time deliberating the case, it would undermine confidence in local and foreign investment.

He said that currently, both local and foreign investors lacked confidence in Thailand, because overall investment by the government remained unclear. Under the circumstances, private companies have not dared invest in new projects.

TCC chairman Pramon Sutivong said the current political situation had shaken and undermined the confidence of many parties in investment and trade. Should the situation drag on, it would further erode foreign investors' confidence in the Thai economy. Many have begun to project that the economy would grow no more than 4 per cent if the political impasse remained unresolved.

Anoma Srisukkasem,

Petchanet Pratruangkrai

The Nation