Now there are growing fears that the economy might expand by only 3.5 to 3.8 per cent this year due to a slump in domestic demand and investment. The export sector is now the main engine of economic growth. Export and tourism revenues are keeping Thailand afloat, while domestic demand, private investment and government spending are in bad shape. But within the export sector, the story is not all rosy. Only the multinational companies are doing well, while the labour-intensive exporters are seeing their margins squeezed.

Something must be done urgently to boost confidence, so that we can have a growth rate of at least 4 per cent to get moving again. A growth rate below 4 per cent is unacceptable because it would bring adverse consequences.

As a rule of thumb, the Thai economy should grow by at least 5 per cent a year for the government to earn enough tax revenue to repay debts and invest in public infrastructure. This growth rate also helps absorb the 300,000 to 400,000 new graduates entering the job market each year. Now there are worrying signs that these new graduates might have a tough time getting jobs. What's more, there is a risk of layoffs at companies facing financial troubles. Almost everyone is complaining of poor sales and sluggish business.

Thailand's growth rate is already the slowest in the region, trailing Singapore, Malaysia, Indonesia and the Philippines. India, China and Vietnam are the stars of the region now, registering growth rates of 7-9 per cent.

Unfortunately, this interim government has never paid enough attention to economic problems. Its priorities, if any, appear to be politics and southern unrest, which now seem out of control. It has no one creative enough to come up with new ideas to boost confidence and jump-start the economy. Poor economic conditions will also complicate a smooth transition to democracy due to possible unrest among farmers and wage earners.

The Bank of Thailand, which has already brought its short-term rate down to 4 per cent, might have to be more aggressive and bring it down further - by another full percentage point to 3.0 - in order to stimulate demand, according to Macquarie Research. The central bank, too, has underestimated the sharper-than-expected economic slowdown. It has been more concerned with inflationary pressure than with sluggish economic growth. It is also focusing more on stemming the baht's rise than managing the economic downturn.

At last, the Finance Ministry has realised that it must do something. It is now gathering proposals from various other government agencies before introducing a broad-based economic stimulus package. These measures include tax incentives for homebuyers, renovation of tourism sites and training of personnel for the tourism industry, and a reforestration programme to create 100,000 jobs at the grass-roots level. State-owned banks will be asked to lend Bt25 billion to small- and medium-scale enterprises, which have been hit hardest by the economic downturn.

The chances of an economic recovery in the fourth quarter look slim because the current political turmoil is not likely to abate. Thailand may have a general election in December, but it will be rocky road until then because of certain elements trying to rock the boat and add fuel to fire. It will be hard for the interim government to boost confidence since almost everybody has written off the Thai economy. Investments have been postponed until after the general election. If the election is delayed, the economy will pay a dear price. Recovery will be delayed too.

At this juncture, Thailand needs national unity. But it won't come easily.