Thailand's political problems may end up being financially painful

At this stage, it is still uncertain who will be his successor, but there is a growing possibility that the new premier could come from neither the Puea Thai party, set up just recently to regroup former PPP MPs, nor the opposition Democrat party.

At least three names have emerged as potential candidates, namely, Gen Chettha Thanajaro, leader of the Ruam Jai Thai Chart Pattana party; Snoh Thientong, leader of Pracharaj party; and Sanan Kachornprasart, a senior member of now-defunct Chart Thai Party.

Those who advocate these candidates have argued that Puea Thai, which is closely related to ousted PM Thaksin Shinawatra, should not field its candidates this time round because there is a strong chance that antigovernment protesters would return to the streets once again.

By the way, PPP, Puea Thai's predecessor, had already nominated two previous PMs - Samak Sundaravej and Somchai - whose lasted just eight months and three months, respectively. Besides the uncertainty surrounding the new potential PM and his administration, analysts have also cited Thaksin's comeback strategy as another political risk.

As far as the economy is concerned, they would hope the new government could be set up quickly to implement the economic stimulus package amid the global downturn. Given the absence of a fully functioning government, the previous Bt100billion stimulus pack¬age is now in limbo, making it more difficult to avoid further recession risks.

During this year's fourth quarter, there was already a sharp drop in exports due to the global economic slowdown following the US financial crisis. As a result, the country's economic growth could fall significantly next year, to just 1 per cent before recovering to around 3 per cent in 2010. To help offset the risks resulting from delayed fiscal measures, monetary authorities last Wednesday also cut the policy interest rate by 100 basis points to 2.75 per cent.

Meanwhile, the risk of inflation has been mitigated by a reduction of excise tax rates affecting oil prices, electricity rates and continued weakness of commodity prices. Inflation is projected to fall to just 1.1 per cent. Externally, research shows that imports in fiscal 2009 will likely decline due to lower commodity prices and lacklustre domestic demand.

Exports will also decline due to the global recession, with the net trade effect being a surplus for 2009 that will support a favourable current account.

However, the country's capital account would be the main source of fund outflows. With the so-called gross international reserves currently at 37 per cent of GDP and dollar swaps totalling about US$6 billion to $7 billion, the central bank may also liquidate its resources to smoothen exchange rate fluctuations.