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Published on October 5, 2007

Such is the finding of a new survey conducted by the Economic and Business Forecasting Centre of the University of the Thai Chamber of Commerce (UTCC).

The government earlier predicted the economy would start recovering in the fourth quarter, but UTCC yesterday forecast that domestic consumption would not pick up until next year's first quarter, when a new government would be formed after the general election.

Although the election is scheduled for December 23, consumers remain hesitant, because of low confidence regarding the ongoing gloomy political situation, centre director Thanawat Polvichai said yesterday.

The result came from the survey "The Direction of the Thai Market and Consumer-Spending Behaviour on the Eve of the General Election", with a random sample of 1,200 people nationwide from September 20-27.

It showed 71.2 per cent of respondents saying the economic, social and political situation had a negative impact on their spending, while only 6 per cent said it had a positive effect.

In addition, 72.1 per cent saw no need to buy durable goods likes homes now, while 27.9 per cent were ready to go ahead with such a purchase.

Despite rising oil prices, Thanawat said consumption would increase in next year's first quarter.

"Petrol prices will probably climb to Bt32 a litre soon, but I don't believe it'll affect consumers' behaviour very much, because most drivers are already used to this price level," he said.

As for the Energy Ministry's recent decision to float the price of liquefied petroleum gas in December, he said that should not have a strong effect on

consumers, because one family uses only half a petrol tank per month.

He said the average inflation rate would be 2-2.5 per cent this year. However, he said the inflation rate was likely to rise to 3-3.5 per cent in next year's second half.

He warned that the Kingdom's economy would be affected next year by repercussions from the global economy, including the US sub-prime mortgage troubles and an increase in China's non-performing loans.

He also said the strong baht was another risky factor. The baht is predicted to run about 32 to the US dollar next year, as the sub-prime crisis in the US may lead to more foreign investment in the stock exchange and real sector.

Two other concerns are political instability and natural disasters, he said, adding that gross domestic product (GDP) would expand 4.5-5 per cent next year while remaining at 4.1 per cent this year.

Finance Minister Chalongphob Sussangkarn said from Seoul that the local interest rate still had a chance to drop next year, while the GDP growth should reach 5-6 per cent.

UTCC, however, downplayed the impact of the general election on the economy. It predicted the amount of money circulating during the political campaign would total about Bt20 billion to Bt30 billion, lower than the Bt30 billion to Bt40 billion in previous campaigns, due mainly to the shorter duration of this one.

"Political campaigns usually take about three months, but the Royal Decree for this election has yet to be announced, so there may be only two months left for political campaigning," Thanawat explained.

However, 35 per cent of survey respondents believed a new government would be able to create stability within a year, while 20 per cent believed the government would suffer from a low level of stability.

The survey showed 45.5 per cent of respondents believed that government stability had an influence on consumers' spending, while 15.3 per cent said their spending depended only slightly on the political situation, and 10.4 per cent said political instability had no effect on their spending habits.

Forty-two per cent of respondents said they would purchase more once the election was over.

Chalida Ekvitthayavechnukul

 The Nation