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The Bank of Thailand (BOT) yesterday announced that the Thai economy has bottomed out. But it is too early to celebrate. Although the central bank offered a more optimistic view compared to some economic institutions, the central bank did not rule out the possibility that it might take quite a while for the Thai economy to bounce back from the U-shape.

Earlier this week, former finance minister Kosit Panpiemras also predicted that the worst is over for the Thai economy. However, he noted that the pace of economic recovery would depend on the government's spending. He noted that while the private sector is weak because economic confidence is not fully restored and the export sector has slowed down, the public sector would play a key role in driving the economy forward in the next 18 months. After all, the government had earlier predicted that the economy might contract for the first time this year, shrinking 3.5 per cent.

The economy might have bottomed out but it is still very fragile. Although the central bank said the worst was over, it noted that the global recession would continue to slash demand for electronics and automotive products, affecting Thailand's industrial production, which fell for a seventh month in May.

Exports, which comprise about 60 per cent of Thailand's economy, slid 26.5 per cent from a year earlier to US$11.55 billion in May, declining for a seventh month, the central bank said. They were down 25.2 per cent a month earlier. Thailand's imports, meanwhile, fell 34.3 per cent last month to $9.21 billion after a 36.4-per-cent drop a month earlier. The trade surplus in May was $2.34 billion compared with $619 million a month earlier. Tourist arrivals dropped 22.2 per cent from a year earlier to 912,000 last month, the central bank said yesterday.

These figures show how fragile the Thai economy is. Dr Aekkachai Nittayagasetwat, Dean of Business School, the National Institute of Development Administration (NIDA), on Monday said the economy was likely to be sluggish for a long while because there was no obvious sign that the global economy would pick up soon. He said that a recent increase in demand was simply to offset a sudden drop in demand earlier. The World Bank painted a gloomy picture of the global economy as it predicted that the global slump might be deeper than earlier forecasts.

The ongoing economic recession could lead to unemployment and social problems. A recent protest by workers of Triumph International (Thailand), a subsidiary of Triumph-brand lingerie and swimwear, was simply a reflection of the economic recession. The company's executives said in a statement that it had to lay off almost 2,000 workers because of the global recession and a drop in consumer demand.

Representatives of the Thai garment association said they had to closely monitor the situation at Triumph because similar incidents could happen at other companies in the future if the demand continues to be sluggish.

All eyes are now on the government to see how it will pull the economy out of recession. After the House passed two bills to enable the government to borrow up to Bt800 billion to stimulate the economy, the government of Prime Minister Abhisit Vejjajiva must now spend the money wisely and quickly to boost domestic demand.

The government must urgently stimulate domestic consumption to offset the slump in the export sector. Aekkachai suggested the government consider using the money in quality projects, which are worth the borrowed money.

But even in the best-case scenario, Aekkachai predicted that the Bt800 billion would not bring about the results until late this year.

The government would have to act quickly to bring out the best from the Bt800 billion that it is entitled to borrow. The money will have to focus on projects that can take off immediately. The government's longevity will depend on whether the loans will be able to stimulate the economy. Because, once it spends the Bt800 billion that it is allowed to borrow, it will not have any tools left.