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The economy is already in technical recession after seeing quarter-on-quarter contractions for two consecutive quarters. It saw a 1.9-per-cent contraction in the first quarter, which was an improvement over the shrinkage of 6.1 per cent in the preceding quarter.

The National Economic and Social Development Board (NESDB) revised downward its forecast for the year to a contraction of 2.5-3.5 per cent, from its previous forecast of between zero growth and minus 1 per cent.

However, the think-tank's secretary-general, Ampon Kittiampon, expressed concern that the economy could fall even more steeply than predicted if the second phase of the government's Bt1.56-trillion stimulus package is not implemented in October because of political instability.

This would delay private investment, which is expected to pick up in the first quarter of next year. Moreover, the global economic recovery and fluctuation of oil prices and foreign exchange have become crucial factors in the Kingdom's economy, he said.

"The tardiness in public investment would have a tremendous influence on economic recovery … The key is the government must accelerate its mega-projects in a bid to build up business confidence and lead to private investment," said Ampon.

Household spending in the first quarter shrank 2.1 per cent, the worst contraction since the 1997 crisis, as the real sector slashed production capacity following the global recession, he said.

The Kingdom needs political stability for the rest of the year to enable the government to carry forward its economic policies.

The economy could bottom out in the first quarter, or see a slower pace of contraction in the current quarter if there are no further events such as the April violence. The political stalemate could worsen the economic situation, however.

The Kingdom has enough to get by if there is a contraction of 3 per cent this year, with nominal gross domestic product (GDP) of Bt8.5 trillion, higher than the Bt5 trillion achieved in 1997.

But the size of the economy cannot facilitate much-needed social and infrastructure projects like energy and public health in the future, or absorb new graduates, said Ampon.

Deputy Prime Minister Korbsak Sabhavasu acknowledged that economic growth in the second quarter would be worrisome, due to the political unrest in April.

He said he was not surprised by the big contraction in GDP in the first three months this year, as the government's first stimulus package had started only in early April.

 Meanwhile, public debt is on the rise as the government and state-owned enterprises borrow more.

Pongpanu Svetarundra, director-general of the Public Debt Management Office, yesterday said that as of the end of March, public debt had risen to Bt3.69 trillion, or equivalent to 40.97 per cent of GDP. This compares with the February figures of Bt3.6 trillion and 40 per cent of GDP.

In the first seven months of the current fiscal year, the government borrowed Bt232.69 billion in the domestic market, while state enterprises borrowed Bt144.2 billion.