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The economy, particularly the export and tourism sectors, would be hit hard next year if the US, a major export market, enters into a recession.

Nipon Poapongsakorn, Thammasat University's rector of the Faculty of Economics, said economic growth could be lower than 3.8 per cent next year if there is serious damage to the "real" sectors.

However, the impacts would be rather gradual hence the government and businesses have time to prepare for challenges.

Chulalongkorn University's rector of the Faculty of Economics, Teerana Bhong-makapat, said the economy could be as badly affected as during the 1997 economic crisis.

Meanwhile, the Inter-national Monetary Fund said more European banks may fail as they struggle to raise fresh capital from investors.

In the US, lawmakers and officials also moved towards forging a second fiscal stimulus

bill after Federal Reserve chairman Ben Bernanke endorsed the idea and the Bush administration dropped its opposition.

Bernanke warned legis-lators yesterday that the |credit crunch is "hitting home", with Americans unable to get auto loans and companies denied cash, and recommended measures to help borrowers.

White House Press Secretary Dana Perino said President George W Bush was "open to the idea" of a new stimulus.