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 The securities house said in its April-June Economic Quarterly publication that the forecast is based on three main factors: severe dry-up in international trade flows; an expectation for the situation to worsen as the cycle has not yet bottomed and more aftershocks are likely; and the insufficient stimulus measures so far to offset weakening external demand and the impending second round effects.

 Finance Minister Korn Chatikavanij earlier said that the economy may contract 3 per cent this year. Without stimulus measures, the contraction could be 8-9 per cent, he said.

 "Our study shows that at current levels of economic activity, the Thai economy is already in a recession. We also believe that it will be prolonged, with activity to remain low for the remainder of 2009 and a recovery not to begin until early next year. The situation may not be as bad as in 1997-98 when the Thai economy was devastated by the regional financial crisis, but this time around we are in the midst of a truly global economic upheaval," the house said.

 For export-oriented economies like Thailand to recover requires an upturn in the US economy first and improvement in other leading economies such as the EU and Japan leading to a trickle down effect on regional economy. A Bank of Thailand study shows that a 1 per cent decline in the GDP of this country's main trading partners would lead to a 1.6 per cent drop in Thai export growth.  Moreover, a slowdown in exports acts as a drag on domestic production which in turn reduces demand for imports and this is feeding into the downward spiral.

 Tisco lists textiles, forestry, chemicals, base metals and machinery as the five industries most exposed to global factors. By contrast the transportation & communication sector, real estate, restaurants & hotels, construction, and wholesale & retail trade were least affected.

 Tisco expects the Thai baht to strengthen in late second quarter this year with the trading range of Bt35-Bt37 per US dollar, as the greenback is weakening against other leading currencies.