Speaking at the seminar "How the Political Vacuum Affects the Economy", organised by BizWeek weekly newspaper, panellists were of the opinion that the court decision could lead to the dissolution of key political parties. And if that did happen, then it would be unlikely for the House to be reconvened any time soon to approve budget disbursements.

Somchai Jitsuchon, an economist with the Thailand Development Research Institute, said, "The government can deal with a six-month delay in budget disbursement, but now it is likely the budget may be put on hold for a longer period."

He therefore suggested that the government may find it necessary to introduce "emergency measures" to draw money to finance some government projects and routine spending, because it would not be possible to wait for House approval of the budget for the next fiscal year, which starts in October.

Somchai added that the political crisis would probably affect Bt200 billion worth of investment. Therefore, government spending was essential to boost the economy during this critical period.

He said that from now on, people would wait to see if a court ruling could ease political tensions. "It will depend whether the upcoming ruling will be acceptable to most people," he said.

Yesterday, the Constitution Court agreed to consider legal cases that could lead to the dissolution of both the Thai Rak Thai and the Democrat parties. The cases cast doubt on whether new elections could take place on October 15, as planned by the caretaker government.

Chulalongkorn University economics lecturer Teerana Bhongmakapat said that even if the caretaker government held an election in the next quarter, it would normally take a few months to form a new Cabinet.

He said it was impossible to wait for the budget disbursement to stimulate the economy. The government may instead consider cutting corporate income tax, in order to boost consumption. He suggested there was room for a cut, because Thailand's tax rate, currently 30 per cent, was considered higher than for other countries.

On the brighter side, Teerana said delays in budget disbursement had eased inflation pressures.

He expects to see the country grow around 4 per cent this year, but that may drop to around 3 per cent next year.

Apart from the political situation, skyrocketing fuel prices were also a factor affecting the Thai economy. "I believe the Thai economy could handle the oil-price rise if it stood at no higher than US$80 (Bt3,000) a barrel," he said.

Teerana also said the court could restore confidence, but only "if people believe the Court is righteous in its ruling".

University of the Thai Chamber of Commerce economist Thanawat Polwichai said the Thai economy would continue to be driven by exports and tourism.

He suggested the new government not adopt any more populist policies, because they could result in negative consequences and should instead assume a sufficiency-economy approach instead.

Wichit Chaitrong

The Nation