But the new government would decide if it wants to maintain a balanced budget or opt for a deficit one, Finance Ministry officials said.

The ministry expects the country's economic growth in 2007 to fall below the 5-per-cent forecast, according to the officials, who asked not to be named.

"Although the caretaker government has already approved the 2007 budget, the new government would give the final approval," they said, indicating a possible change in the final course.

A poor economic outlook has prevailed as a result of the current political vacuum. The situation has discouraged private investment, already battered by high oil prices and higher interest rates.

The absence of an official government has also led to delays in the implementation of public investment projects.

Business groups now fear that domestic consumption will drop. This could reduce corporate earnings and weaken the national fiscal position, now that corporate income taxes represent a high portion of government revenue. It would also prevent the possibility of continuing with a balanced budget next year.

The Bank of Thailand (BOT) said yesterday the economy is still likely to grow by 4.25 per cent this year, at the lower end of the central bank's forecast of 4.25-5.25 per cent. This is despite the budget delay and slowdown in private investment. It also follows a downgrade in the economic forecast earlier this year.

Somchai Sujjapongse, the Finance Ministry's spokesman, suggested that there was the possibility of a budget deficit only if the economy expands by less than 3 per cent.

The caretaker government earlier ap-proved a 2007 budget of Bt1.476 trillion on the assumption that economic growth would be 5 per cent with inflation at 3.5 per cent. This is compared to a budget of Bt1.36 trillion for the 2006 fiscal year.

Somchai said yesterday the latest estimates indicate gross-domestic-product growth of less than 5 per cent next year. And this, he admitted, may affect government revenue.

But if the new government wants to boost the economy, it could opt for a budget deficit, he said.

Caretaker Deputy PM and Commerce Minister Somkid Jatusripitak has asked the Finance Ministry and the Budget Bureau to prepare the budget bill for the new government's consideration. Somkid said the caretaker government would not take any action in approving the 2007 budget. This would mean a delay on the October deadline.

The political vacuum is expected to delay the implementation of the new budget by at least two quarters, from October this year to March next year.

In regard to 2006 economic growth, Bank of Thailand senior director Suchada Kirakul said high export activity and higher-than-expected private consumption in the first five months of the year could offset reduced government spending and private investment.

Suchada said the 16.5 per cent growth in exports for the first five months was higher than expected and had helped bolster the economy.

Exports in the second half were likely to decelerate due to a slowdown in the global economy caused by oil price hikes and rising interest rates. But they would grow between 11-13 per cent for the entire year, she said.

Private consumption indicators also showed satisfactory pace of growth, which helped drive the economy, she said.

The Private Consumption Index for May grew by 1.6 per cent year-on-year, up from a 0.8 per cent increase in April. The Private Investment Index rose only 0.6 per cent for May, down from 1.1 per cent in April.