At a press conference yesterday, the brain trust of the university's think-tank said in the worst-case scenario, the country's economy may grow 3.2 per cent this year, compared with the government's prognostication of around 5 per cent.

Growth would slow largely because of delays in the government's mega-projects, on which the government has planned to spend Bt1.8 trillion over the next four or five years.

Centre for International Trade Studies director Aat Pisanwanich told the press conference political turbulence would destroy consumption and investment.

In order to increase the Kingdom's economic growth and increase confidence among foreigners, Aat suggested that Thaksin should resign as prime minister. "Thaksin could return if he can explain himself to the public about the Shin Corp deal," he said.

The centre has evaluated the effects of political turmoil using three scenarios. The worst-case scenario, in which the political turmoil lasts longer than six months, shows the country's GDP growing 3.2 per cent this year.

In the second scenario, if the situation ends within the next three months, the economy will grow 3.98 per cent.

And in the third scenario - with everything returning to normal right now - current growth predictions stand.

"People will reduce their consumption, whereas foreign investors will turn to invest in

our rival countries, particularly

in Vietnam, China and India," he said.

The impact has already been felt, Aat said, adding that Thailand recently lost to Vietnam a US$513-million (Bt19.92 billion) plant by US-based computer-chip giant Intel Corp. He said the company picked Vietnam over Thailand because of the domestic uncertainties here.

"Overall investment could drop almost 6 per cent this year," he said, especially if the government were to postpone several massive infrastructure projects, which he said would be drivers for long-term economic growth.

He said the services sector would also suffer from the political turbulence. All businesses related to tourism and small and medium-sized enterprises will slow down. The employment rate will decrease due to delays in business expansion.

Under the worst-case scenario of the university's economic model, domestic consumption by the private sector would fall a percentage point to 3.16 per cent. Government consumption would be reduced by 0.18 percentage point to 5.73 per cent.

The export sector should see the fewest effects from the political conflict. Exporters would benefit from the baht weakening to Bt42 per US dollar under this scenario. Imports would slow because of the suspension of mega-projects and less foreign direct investment.

The study found that export growth would expand by 0.31 percentage point to 13.46 per cent. Import growth would decrease by 0.45 percentage point to 13.8 per cent. The trade deficit of the country would be $10.36 billion and the current-account deficit $6.9 billion under the worst-case scenario.

If Prime Minister Thaksin Shinawatra does not resign from office, or if he is still the premier after the April 2 election, political tensions would increase, affecting economic growth similar to the worst-case scenario.

"Possibly, the country's economy will slow down to the worst scenarios," he said.

In the second-worst scenario, mega-project investment would be higher. The country's overall investment would grow 8.57 per cent, 1.3-percentage points less than the normal scenario. The country's trade deficit would be $10.95 billion, whereas the current account deficit would be $5.65 billion. Tourism growth would drop to 5 per cent from 8.5 percent.

Under the normal scenario, Thailand's economic growth would be 4.5 per cent. Mega-project investment would be full scale. Export growth would be 13.1 per cent, and total exports would be worth $125 billion. Import growth would be 14.25 per cent, and total exports would be worth $136 billion.

Petchanet Pratruangkrai

The Nation