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Most of the central bank's policy-makers are hawkish, while the Finance Ministry's economists are more dovish toward promoting growth. The central bankers set their singular aim at combating inflation. Earlier this year, they were keeping a concerned eye on inflationary pressure, with the spectacular rise of oil and commodity prices. They decided to keep interest rates high.

But when Lehman Brothers collapsed in September, the paradigm changed. Fears of inflation quickly turned into fears of global financial meltdown and severe recession. The central bank might not have adjusted its mind-set on its monetary policy-making quick enough in the face of the worst global financial crisis since the Great Depression of the 1930s. But the oil and commodity prices collapsed, pinching the inflationary balloon. The central bank had to adjust its course.

At the same time, the government went on to stimulate growth through fiscal expansion. First, the budget deficit was raised from 0.9 per cent to 2.5 per cent of the gross domestic product. Second, the government introduced another Bt100 billion in supplementary budget in case it needed to put cash into the hands of Thais quickly so they could get money into the economy. Third, it unveiled a plan to spend Bt1.3 trillion in infrastructure projects. These stimulus measures were similar to what other regional economies had announced during this time of financial turmoil.

Before Wednesday, the financial markets expected that the central bank would cut the rate by 25 to 50 basis points at the most. But the bank caught everybody off-guard with the radical monetary loosening by cutting the rate by one full percentage point. The steep cut reflected the bank's concern over the gloomy outlook ahead.

From its statement, it cited its concern over falling industrial output and a decline in exports. It was also worried about a delay in fiscal spending by the government. During this time of economic weakening, fiscal spending works fastest in stimulating demand. But the government is not functioning due to the political turmoil. Wit no one in charge, state money is slow to reach the wider economy.

As the political crisis is likely to drag on, this will further weigh on the already weakening economy. Nobody is sure when we are going to have a new government or whether more violence will erupt. Although the Somchai government has been removed by a verdict of the Constitutional Court, the crisis is not over. It will continue for at least the medium term.

The seizure of Suvarnabhumi and Don Mueang airports has dealt a severe blow to confidence. The high season for the tourism industry is underway. But hotels, airlines and tour operators are suffering from the absence of guests because the airport closure has disrupted bookings. This loss of confidence will further undermine the tourism industry next year when the country can expect to see arrivals fall by half. Tourism contributes about 6 per cent of the GDP and has become a main source of income distribution.

Going forward, most research houses are revising Thai GDP growth downward next year. Some have already slashed the growth rate projection to 2.0 per cent, while others have forecast 1.50 per cent. This situation is severe because the normal growth rate of the Thai economy should be 5-6 per cent a year.

Given the gloomy outlook, the central bank has no choice but to cut its rates even steeper. By the middle of next year, the central bank's repurchase rate could fall to 1 per cent. We all are bracing for a hard time ahead.