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Political chaos and Bangkok's state of emergency will have a short-term effect on trade and investment, but Thailand's economy will continue to grow in the long run, due to good economic fundamentals and rising goods prices, says UN Conference on Trade and Development chief Supachai Panitchpakdi.

However, he warned that Thailand should be aware of high inflation, the slowing of the global economy and a new form of non-tariff barrier that would create export difficulties.

Speaking yesterday at the University of the Thai Chamber of Commerce on "New Challenges for Thailand in a New Era of Global Trade and Investment", Supachai said Thailand and other countries should be on alert for inflation and the world economic slowdown.

"The current political disorder should not create a harmful impact on the economy compared with that from skyrocketing oil prices," he said.

He refused to comment on how to solve internal problems but said he hoped the conflict would end soon, in order to ensure sustainable growth.

Thailand has been rated Asia's second most attractive country for foreign direct investment after China. It has good economic fundamentals, and the rising trend of goods prices should ensure sustainable economic growth, he said.

But the government must closely monitor the increasing trend of headline inflation, because that will affect the whole economy, he warned.

Supachai said the government must stimulate the economy cautiously, because it might create cost-push inflation. The latest increase in the policy interest rate was the right action and suitable for the economy.

The government should ensure that all economic policies make a balanced impact.

He also warned emerging nations to be aware of a new kind of non-tariff barrier, the "carbon tax", with developed nations implementing this tariff as a trade barrier for emerging nations.

Any products that create carbon dioxide would be subject to higher tariffs or banned.

Supachai suggested all manufacturers and traders limit the use of carbon dioxide, adapt environmentally friendly production methods and exercise clean development for production and transportation.

With farm prices rising, he predicts Asian countries will need a second green revolution to promote agricultural growth.

Plans should include developing seeds, improving agricultural infrastructure, developing technology for farm management and developing biotechnology for fertiliser production.