In spite of official economic growth rate forecasts of more than 4 per cent this year, the Thai private sector expects the economy to grow less than 4 per cent, because of political uncertainty, says a new survey announced yesterday by the University of the Thai Chamber of Commerce (UTCC).

More than half of the 800 respondents said they thought that economic growth by year-end would finish lower than 4 per cent, while 36 per cent took a more pessimistic view that the economy this year would grow below 3.5 per cent.

The survey was conducted from March 7-16 among various industries. It showed that political instability was the key negative factor eroding confidence among the business sector, followed by the New Year Eve's bombs in Bangkok, rising oil prices, the baht's appreciation and high interest rates, said Yajai Chuwicha, head of the Chamber Business Poll at the university.

In spite of the downward trend in interest rates and oil prices, 88 per cent of respondents gave heavy weight to the political situation as the major factor affecting the economic slow-down this year.

The private sector suggested the government cut interest rates sharply, accelerate budget disbursement and call for a national election as early as possible.

Earlier, the Finance Ministry predicted the economy would grow 4-4.5 per cent this year, a similar range to another forecast by the National Economic and Social Development Board showing the Thai growth rate would be 4-5 per cent. Some research groups have also predicted that Thailand's economic growth may drop below 4 per cent this year.

The UTCC survey showed that despite the recent Cabinet reshuffle, businessmen responded that political uncertainty continued in the government. The respondents attributed five negative factors that were slowing down economic growth.

Forty per cent of respondents said their total revenues had decreased gradually, 32 per cent that they had remained unchanged and 28 per cent that they had increased.

Thanawat Polvichai, director of the UTCC's Economic and Business Forecasting Centre, pointed out that the factor of political uncertainty would destroy Thailand's image among foreigners and harm confidence among foreign and Thai investors.

"Business enterprises are most cautious about the uncertain political situation, because it can influence other factors," he said.

To increase confidence among the business sector, Thanawat

suggested the government put into place three concrete policies to stimulate the country's economic growth.

First, he advised that the government decrease the policy interest rate by 0.5-1 per cent and speed up budget disbursement. The government must also promote economic growth in accordance with the economic-sufficiency policy.

Second, to solve social problems, the government must accelerate increased security for people in the country, particularly in the South.

Third, to resolve political uncertainty, Thanawat suggested the government set up a national election as soon as possible and ensure transparency in its administration.

Most respondents also agreed that the current government should adjust its political, social and economic policies.

Additionally, Thanawat said the strengthening of the baht was another key factor causing the economic slow-down.

The baht continued its rise yesterday and hit a new nine-year high against the US dollar. The baht was quoted at a range of 34.80/34.83 to the dollar yesterday.

Thanawat said the baht had moved beyond businessmen's expectations. This will cause more difficulties for many businesses to grow this year.

The continued rising of the baht against the dollar will cause its value to range between 34.50 and 35.50 to the dollar this year, he said, whereas businessmen said they would be able to absorb the burden only if baht was not higher than Bt37.50 to the dollar.

Petchanet Pratruangkrai

The Nation