Here is the Business Desk's perspective on what keeps the economy afloat.For the first half of the year, gross domestic product growth was estimated at 5.4 per cent - a comfortable level for a country that has been plagued with a slew of problems, particularly political turmoil.

The Bank of Thailand has pointed out that the booming demand for Thai exports - which contribute about 10 per cent to GDP - and the recovery in the tourism industry have propelled the economy forward, while other economic drivers, particularly private consumption and private investment, have lost steam. While the tourism business grew 19 per cent in the first six months, exports rose by 16.6 per cent to US$60.55 billion (Bt2.27 trillion).

The real hard times, however, are expected to come in this half year when the external environment may not be so favourable. Exports could shrink while vacationers could cancel or cut back on their travel plans.

Despite the gloomy outlook, the central bank still hopes that the situation will improve next year when government spending, which contributes about 15 per cent to GDP, kicks in, along with a pick-up in private investment, which contributes 20 per cent to GDP.

Prakit Shinamourpong, vice president of the Thai Hotels Association, said the tourism industry was improving after some dismal years. The business was hit hard by many threats including Sars, bird flu, the tsunami and terrorism.

Hotels - particularly those in Bangkok, Phuket, Hua Hin and Pattaya - are enjoying higher occupancy rates thanks partly to new sources such as the Middle East, India, Russia and Eastern Europe.

"Other businesses may be slowing, but the hospitality sector is still growing. That's proved by more than 20 new hotels being developed in Bangkok," Prakit added.

The emergence of budget airlines is helping to stimulate the tourism industry and the opening of Suvarnabhumi Airport will attract more visitors.

According to the Association of Thai Travel Agents, the number of tourists using its members' services rose 36.44 per cent in the first half. Arrivals were 1,450,974, up from last year's 1,063,446.

China remained the top market, soaring 91.4 per cent to 251,780 visitors from last year's 131,505. Korea retained second place with a 6.88-per-cent leap from 133,613 last year to 196,259 this year, while Japan followed in third place with a 30-per-cent jump from 143,131 to 186,128 visitors.

The UK was the largest European market for the six-month period, maintaining the pace with a 0.16-per-cent increase to 70,426 visitors.

Exporters were also delighted with their first-half performance, particular those in the computers and parts sector, which raked in $6.87 billion in the first half, more than all the other sectors. Ranking second and third were the auto and electronics sectors, which posted export growth of 29.4 per cent and 26.72 per cent respectively.

For the auto industry, while domestic new sales fell, export targets were maintained, Ayudhya Securities said.

The securities house has revised its vehicle production estimate for this year down by 4 per cent to 1.24 million units due to the slowdown in domestic sales in March and May. But export volume remains solid and should race ahead by 25 per cent.

Unfortunately, only the export and tourism sectors blossomed. Other indicators painted another picture.

According to the Bank of Thailand, consumption in the first half has grown around 4 per cent in real terms, slightly down from 4.4 per cent in the first half last year.

"What has really dragged on the economic growth in the first quarter is a sharp drop in government spending, while private investment grew by only 6 per cent in the first half of the year, against 11.6 per cent in the same period last year," Governor Pridiyathorn Devakula said recently.

The retail industry is also suffering from lower confidence. The industry should grow by 5.4 per cent to Bt1.7 trillion this year, off the 6.9-per-cent pace seen last year.

The property sector, which contributes largely to any growth in the construction and construction-materials industries, has also been hit hard as home buyers delay their purchases.

Blue-chip Land and Houses Plc, the harbinger of the real-estate industry, for the first time since 1997 reported slower sales and lower earnings. Last week, after booking a 43-per-cent decrease in first-half net profit from Bt2.51 billion last year to Bt1.43 billion, L&H said it had knocked Bt4 billion off its annual sales target, slashing it from Bt24 billion to Bt20 billion.

Harder times for our economy are expected in the second half, when the US economy is expected to weaken and dampen demand for Thai products. The US move to abolish trade privileges for Thai products could also cloud the outlook.

Pridiyathorn warned the Kingdom's export engine would likely run out of steam in the second half of the year. Santi Vilassakdanont, president of the Federation of Thai Industries, also recently expressed worry over the health of the export industry in the second half.

"If oil prices keep rising and external factors are not settled, aside from the strengthening of the baht against the US dollar, which makes it harder for importers and exporters to quote prices, exports could expand less than 15 per cent in the second half," Santi said.

The central bank has said private investment is likely to slip into a wait-and-see mode until political and oil trends settle down. Private investment could gain only 3.5-4.5 per cent in this half.

Growth in private consumption, which amounts to 56 per cent of GDP, is also expected to keep tapering off to 3-4 per cent in real terms in the second half, from 4.1 per cent and 3.8 per cent in the first and second quarters.

But Pridiyathorn believes consumption will not fall much as demand for disposable goods is expected to show good growth. Farm income and crop prices are still doing well, while employment as well as minimum wages will also improve.

Propping up the economy will be government spending, which contributes 15-18 per cent to GDP.

Pridiyathorn predicts that government spending in the current fiscal year ending next month will be high, while the carry-over budget to be disbursed in the fourth quarter of this calendar year will help fuel growth. Thus, government spending in the second half of this calendar year is expected to increase 5-6 per cent in real terms or 11.4 per cent in nominal terms.

Taking all variables into account, the central bank forecasts GDP growth for this half year at 3-4 per cent.

The central bank is more pessimistic about next year's GDP, extrapolating growth to 4-5.25 per cent, as exports will not show the same strength as this year due to oil price hikes and falling global consumption.

Growth in net exports, or exports minus imports, is forecast at 5-6 per cent next year. Government spending next year is likely to grow a conservative 3-4 per cent in real terms as the new government is expected to accelerate government disbursements from the 2008 fiscal budget in the fourth quarter of the calendar year.

The governor said the main thrust for next year would come from private investment, which is expected to grow 7-8 per cent in real terms or 11-12 per cent in nominal terms.