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Thailand's carmakers can expect a smaller contraction in capacity use in the third and fourth quarters on forecasts of a global economic recovery, the vice chairman of the Federation of Thai Industries said yesterday.

Adisak Rohitasune, also an executive at Asian Honda Motor, was speaking at a seminar entitled "Thailand's Auto Industry after General Motors' Collapse". He said capacity use in the first and second quarters had dropped by 45 per cent and 46 per cent year on year, respectively.

He estimates contractions of only 27 per cent and 10 per cent in the third and fourth quarters,respectively, thus allowing automakers to achieve this year's production target of 940,000 vehicles: 590,000 for export and 350,000 for the domestic market.

"That target was sharply lowered from 1.8 million units originally,due to poor domestic and export demand, but the situation should improve in the third quarter," he said.

The auto and electronics/electrical-appliance sectors, which account for more than 30 per cent of the Kingdom's exports, are now bullish on an economic recovery.

However, stocks fell across Europe and Asia yesterday after the US revealed it had lost more jobs than projected last month,adding to concerns the first global recession since World War II would persist, because the world is counting on a an economic recovery in that country.

Official figures on Thursday showed US job losses had surged to 467,000 last month, pushing the unemployment rate to a 26-year high of 9.5 per cent.

"People realise the economy isn't as bright as expected," said Franz Wenzel, deputy director of investment strategy at Axa Investment Managers in Paris, which oversees US$678 billion(Bt23.1 trillion).

Kavee Chukitkasem, head of research at Kasikorn Securities, yesterday told Bloomberg that the Stock Exchange of Thailand Index might fall as low as 520 points in the third quarter, with the Kingdom's economic recession curbing corporate earnings.

"There is little sign the economy is out of recession, as exports, tourism and investments continue to slump," he said. "It's probably time for investors to realise the reality that companies' share prices do not justify their earnings fundamentals."

However, Prime Minister Abhisit Vejjajiva remains confident the "Thailand's Strength" programme will help cushion the economy. Finance Minister Korn Chatikavanij yesterday said his ministry was seeking the World Bank's help in assessing the programme before it kicks off in September.

He expects the first investments to be made at that time.

Aside from a Bt50-billion bond issue, the government will also borrow Bt30 billion from financial institutions.

Sukit Udomsirikul, head of research at the Siam City Research Institute, said the global economic crisis had directly affected the Thai auto industry. Listed auto companies' first-quarter net profits fell 136 per cent, for example, although the drop slowed in the second quarter.

"They could recover in the second half of the year, but mostly that would be due to capacity use making up for a declining inventory rather than a true recovery in the industry,"he said.

A recent National Institute of Development Administration report showed the competitiveness rating for Thai auto parts had declined from 102.7 points in last year's fourth quarter 92.89 in this year's first quarter, due mainly to lower purchasing power and the global economy.

Local auto-parts manufacturers rely heavily on export markets, the report said. It suggested the government focus more on training and research and development, as well as adjust import duties on raw materials.