Kitti Sukutamatunti, a deputy secretary-general of the Federation of Thai Industries (FTI), said he was worried about the economy because of the trade deficit caused by huge oil imports. The higher cost of imports compared with export income will cause further problems.

He said the competitiveness of the electrical-appliances and electronics sector had the highest ranking among exports. The improving world economy has bolstered export orders to the end of the year.

But Thai industries remain less competitive than those in India and China, Kitti told a seminar hosted by three associations: the FTI, the Thai Chamber of Commerce and the Thai Bankers' Association.

Kitti said he was not concerned about rising interest rates, because the industrial sector could react to the trend, but the economic slowdown was making it difficult for businesses to get bank loans.

"Banks are not approving more loans because they know that every business has stagnating revenues but rising expenses. The economic slowdown has worsened its sales," he said.

Veerathai Santipraphob, executive vice president of Siam Commercial Bank (SCB), predicted that the policy rate had almost climbed to its peak after the Bank of Thailand held the rate at 5 per cent at Wednesday's meeting.

But the banks continue to lift lending and deposit rates by 0.25-0.5 percentage points.

Veerathai said the baht would probably depreciate, because of the widening current-account deficit, high US-dollar demand and narrowing interest-rate gap.

SCB senior executive vice president Sirichai Sombutsiri said the baht would move to around Bt38 to 38.50 to the dollar, provided there were no irregular factors like war or a huge increase in the US Federal Reserve Board's federal fund rate.

Paiboon Ponsuwanna, also an FTI deputy secretary-general, was worried that interest rates and exchange rates would not be as expected, which would affect the bottom line of the food industry, which was highly sensitive to foreign-exchange volatility.

He said food exports totalled Bt166 billion for 7.62-per-cent growth in the first four months of this year, but profit margins had declined significantly, because of soaring oil prices, high interest rates and the stronger baht.

Prasong Aolarn, president of the Housing Business Association, said the economy would be able to maintain its expansion if the business sector was willing to invest and consumers shook off their caution.

Investors were adopting a wait-and-see policy for a new government, while consumers were taking longer to make decisions about buying large items like houses and cars.

In the first five months, 25,924 housing units were sold. He said that if sales for the rest of the year continued at that rate, then the entire year would be close to matching last year.

Prasong said he was confident the private sector could survive tough times, because the Kingdom's economic fundamentals remained sound.

Anoma Srisukkasem

The Nation