"If we have revenues of more than Bt1.24 trillion, there will be no problem. We believe that income will exceed Bt1.24 trillion and the budget [for this fiscal year] will be balanced without the [need for] support from treasury reserves," said Somchai Sujjapongse. "But if there is an income shortfall, we could register a cash deficit."

He said a cash deficit would become a possibility if corporate income tax for the first half of 2006, which is due to be paid next month, is lower than target by 10 per cent, in line with lower earnings by listed companies.

The government has already recorded a cash deficit of Bt36 billion for the nine months between last October, when the current fiscal year began, and June. However, government revenues over the same period amounted to Bt1 trillion, up 7.5 per cent on the previous year and 7.7 per cent higher than the target.

The Finance Ministry believes last month's recovery in consumption and investment and a clearer political outlook should boost the economy in the second half of the year.

Somchai said yesterday that collections of value added tax, an indicator of consumer spending, rose 27.4 per cent last month, up from 25.8-per-cent growth in the previous month. Taking 6 per cent inflation into account, the VAT collections still rose by 20.3 per cent. However, the consumer confidence index dropped last month because consumers were concerned about both higher oil prices and the political deadlock.

Despite the higher consumption-related tax revenue, collections of corporate and personal income tax decelerated in the second quarter, expanding by 11.5 per cent compared with 13.6 per cent in the first quarter, Somchai said. This was mainly due to higher energy costs, a problem highlighted by Siam Cement Group's announcement that despite higher sales, its second-quarter profits dropped because of higher fuel bills and lower purchasing power.

The Bank of Thailand (BOT) remains gravely concerned that high fuel bills will drive the country's inflation rate beyond its target.

"High oil prices have affected the inflation [rate] and the possibility of hikes in inflation still exists," said BOT deputy governor Tarisa Watanagese.

The continuing inflationary risk indicates that the central bank's policy rate cannot be cut back soon, as some expect, the deputy governor said. Some analysts have forecast that the BOT will cut the key rate in the second quarter of next year.

Tarisa said the central bank remains cautious about economic stability, but is also concerned about economic growth. Its Monetary Policy Committee kept the 14-day policy interest rate steady at 5 per cent at its last meeting because the inflationary risk was acceptable while there was an increasing risk of economic slowdown.

The economy has mostly been affected by external factors such as oil prices rather than the political situation, she said.

Meanwhile, the BOT's court of directors forecast at a meeting yesterday that five new election commissioners will be selected in time for the October 15 ballot, and the election will not have an immense impact on the economy.

National Economic and Social Development Board secretary Ampol Kittiampol said the election date will cause a delay of no more than six months to the government's budget.

BOT director Nontaphon Nimsomboon said he was not concerned about economic growth while export growth remains high and revenue collection still meets targets. In addition, farm incomes continue to rise because of increasing prices for agricultural goods and this helps to maintain domestic consumption, which has been slowing down because of soaring oil prices.

Wichit Chaitrong

The Nation