Private consumption could grow as little as 2.8 per cent in the third quarter, down from 3.6 per cent in the first quarter, due to the anticipated increases in petrol and diesel prices, said an economist.

Coupled with political instability, which could be fuelled by the nullification of the April 2 election, economic growth this year could be below 4 per cent, said Aat Pisanwanich, director of Thai Chamber of Commerce University's Centre for International Trade Studies.

"If the Constitution Court nullifies the election, Thailand could not proceed with pending free trade agreements with Japan and the US. The delay in the mega-project investment would also cut the public investment budget this year. Under this scenario when consumers are tightening their belts, economic growth could be below 4 per cent," he said.

The Bank of Thailand earlier revised downward its gross domestic product forecast by half a percentage point to 4.25-5.25 per cent. The National Economic and Social Development Board will also convene this month to review its own forecast, which now stands at 4.5-5.5 per cent.

On the back of high interest rates and fuel prices, the export sector is now driving the economy. However, the sector has been hit by the appreciation in baht against the US dollar, which will reduce exporters' incomes.

Nitaya Pibultanagit, assistant governor of the Bank of Thailand, said that despite exporters' demand for intervention, the central bank could not run against the tide.

"We can't intervene in the market," she said. "What we can do is to keep the exchange rates in balance."

On Wednesday, the dollar ended at Bt37.64, unchanged from Tuesday. Yesterday, it depreciated to 37.78.

According to Aat, every Bt1 increase in the baht rate would slash export growth by 4.4 per cent and GDP by 0.26 per cent. "Considering production costs and income, exporters are less affected by high fuel prices," he said.

However, oil prices seemed to be the major issue for members of the Federation of Thai Industries.

On Wednesday, the FTI recommended that the government consider cutting the oil excise tax for three months to alleviate the impact. In a proposal to the Finance Ministry yesterday, the FTI asked for lower excise taxes for the installation of NGV engines at unofficial shops to encourage the conversion from pricey fuels to cheap NGV.

FTI members led by their new chairman Santi Vilassakdanont also met with Industry Minister Suriya Jungrungreangkit yesterday to discuss ways of supporting the industrial sector after the rapid increase of oil prices.

Suriya said the ministry was ready to support the industrial sector.

"The government has prepared measures to help any private companies that have been affected by the oil price hikes," he said.

He added the government was ready to consider any requests from companies that are in a state of emergency as a result of rising oil prices. The government also has a clear policy to support a reduction in electricity consumption among manufacturers and to bring in new technologies to support their production.

Kitti Limsakul, a lecturer at Chulalongkorn University's Faculty of Economics, said yesterday that he did not favour the proposed cut in oil excise taxes.

"That would affect state income and the government may need to concoct other measures to raise taxes from other sectors. The government should instead seriously campaign for power conservation or raise taxes on luxury items," he said.

Global oil prices fell on Thursday, keeping momentum after a big drop the previous day that was caused by US government data showing higher petrol supplies.

In London, light sweet crude for June delivery sank 38 cents to US$71.90 (Bt2,718) a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Prices had plunged $2.33 to settle at $72.28 a barrel on Wednesday after the US Energy Department released its weekly report showing a supply rise as refineries boosted output and demand flattened.

Meanwhile, PTT Plc and Shell Corp (Thailand) increased all of their fuels by 50 satang per litre yesterday. The increase followed a similar move by three other oil companies on Wednesday: Esso (Thailand), Caltex (Thailand) and Bangchak Petroleum.

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