It's not just the global crisis hurting Thailand

While Thailand plunged into recession with a first-quarter gross-domestic-product (GDP) contraction of 7.1 per cent, the economy now looks as though it may have stabilised.

The manufacturing sector has probably been through its worst, with global sentiment and confidence picking up over the past couple of months, while the service sector is set to recover thanks to government measures.

According to the UOB report, forecasts for Thailand's GDP have been revised for the second and third quarters to a shrinkage of 4 per cent during each period, before climbing into positive territory in the fourth quarter to 2.6 per cent.

For the entire year, the economy is expected to decline by 3.2 per cent.

As for the baht, the report suggests that there is room for further depreciation due to political uncertainties.

First, the Abhisit Vejjajiva government will next week seek parliamentary approval for an executive decree to borrow Bt400 billion as part of its emergency package to stop the economy from sliding further into recession.

The opposition Pheu Thai Party has threatened to boycott this crucial House session unless the government allows a live telecast of the parliamentary debate.

On the one hand, since the government needs the opposition to join the parliamentary process, it had better accommodate Pheu Thai's demand for a live telecast. On the other hand, the government needs to keep the Bhum Jai Thai Party, its powerful coalition partner, happy during the crucial vote.

Obviously, after this vote, Bhum Jai Thai will expect the Democrat-led government to reciprocate. The Bt64-billion NGV bus-leasing scheme, proposed by a key faction of the coalition partner, is awaiting Cabinet approval.

A high-powered body, led by National Economic and Social Development Board, has been given 30 days to scrutinise the controversial deal before Cabinet makes its final decision.

Apart from political uncertainties, the other risks facing the Thai economy for the rest of this year include the second wave of swine-flu infections as well as escalating unrest in the South.

Yesterday the World Health Organisation declared a global pandemic of the Type-A (H1N1) influenza after more than 27,000 people in 74 countries had become infected, resulting in about 170 deaths.

While most of these cases are in North America and Australia, Thailand is not immune, with the number of confirmed cases having risen rapidly to more than 40 this week.

At least two Bangkok schools were ordered closed temporarily so they could be disinfected, while major tourist destinations like Pattaya and Phuket have stepped up surveillance measures following reports of infections among foreign visitors and locals.

The public-health authorities are preparing to upgrade the status of swine-flu infections to Level C, meaning that there's now inter-city transmission.

While the local situation remains under control, with no fatalities reported so far, the social and economic impact, especially with regard to tourism, hotels, airlines and related industries, are expected to escalate in the coming weeks and months.

With regard to the violent incidents in Yala, Narathiwat and Pattani provinces over the past several years, the risk has also escalated with the recent killings of Muslims praying inside a mosque and a Buddhist monk during a morning alms round.

Overall, political uncertainties, influenza and unsolved turmoil in the South are now prominent risk factors as far as the country's economic outlook is concerned.