Earlier, on April 26, Macquarie Research dashed any hopes of a four-quarter rebound because its economic staff could not get assurances from anybody that the path toward Thai democracy would be smooth. Political uncertainties remained very high. It downgraded Thai growth to 3.5 per cent this year and predicted another one full percentage point cut of the official rate to 3 per cent.

Most other research houses have also written bearish reports about Thailand. KasikornBank Research has said that in the first quarter of this year, the Thai economy grew at only 3 per cent. It looks like we are going to have another lost year.

But yesterday Dr Kosit Panpiemras, the deputy prime minister and industry minister, remained optimistic. As exports continue to grow sharply, they help keep the Thai economy afloat.

Kosit believes that the first-quarter growth of the Thai economy should be 4 per cent. He admitted that confidence plays the key role in boosting economic recovery.

However, investors' jitters so far have more to do with the pollution problems at the Mab Ta Phud industrial estate. Once PTT Plc and Siam Cement, which are the two main investors in the petrochemical business at Mab Ta Phud, have completed their environmental study of the impact of their investments, then the next phase of petrochemical investment there will resume. This will help improve confidence and generate more private investment, which is already running out of steam.

Looking ahead, Kosit also believes that bidding for mega-projects will come on stream in August and this will help kick in the recovery, as it will coincide with the investment in the petrochemical business.

Interest-rate cuts, as engineered by the Bank of Thailand earlier this year, will also bear fruit six to nine months later. Consumers will also be encouraged by lower borrowing rates.

At the same time, the Surayud government is asking all ministries and agencies to accelerate disbursement of their spending to be completed by this June. So, by the fourth quarter, Kosit believes we will experience a recovery. 

Kosit might have tried to paint a rosy picture, but the fact of the matter is that this government is acting, or reacting, very slowly to the changing economic situation. Signs have been evident all along of a weak economy this year.

The political turmoil is also bringing down confidence and growth prospects. Yet it has taken the government so long to finally put together a Bt44 billion package to stimulate the economy.

Although the Bt44 billion package will not make much difference, compared to the size of the Thai economy of Bt6 trillion, at least it is a step in the right direction. The stimulus package will go to assist people running small businesses and those at the grass-roots level so they can have access to cheap credit.

Now, for the first time in recent memory, the prospects of employment for about 700,000 Thais entering the workforce for the first time in their lives are bleak. With the slowdown of the manufacturing sector, some 300,000 skilled labourers will have a difficult time getting jobs.

An economic growth rate of at least 4-5 per cent will ensure that most of the new graduates will be employed.

A banking executive told me that the Surayud government should not look upon itself as an interim one - a view that would lead it to think that it does not need to do anything because it has such a limited time in office.

"If they think they are just serving for an interim term, then they will think that they don't need to do anything. That is not quite right. At least they should do something. Even within one day, they can do a lot if they really wanted to," he said.

General Surayud Chulanont, the prime minister, might be a good soldier, as he was once the army chief, but many people now have serious doubts that he is equally good at running the country.

The two assignments are different arts. He is not known to surround himself with good people. Some people also gossip that he is stubborn in his quiet way. Thaksin Shinawatra, the ousted prime minister, always had capable people giving him advice.

His biggest mistake was that he was too greedy.

So far, Surayud has paid very little attention to economic problems. As it turns out, economic weakness is going to weigh down on his government just as it is having a difficult time surmounting the political turmoil.

Nobody is certain that the path toward democracy won't be a rocky one. This is the key factor that is holding back confidence in the Thai recovery - which might have to be postponed to next year.

Thanong Khanthong

The Nation