At the moment, there is still disbursement from the 2005-2006 budget, which will end in September. Thailand's 2006-2007 fiscal year will begin in October. If the new election and the formation of the new government are delayed, it will make it impossible for Parliament to be able to pass the budget. Caretaker Finance Minister Thanong Bidaya earlier said that if the formation of the new government were to be delayed until the first quarter of the next fiscal year, the impact would not be that much, but if the delay lingered into the second quarter (January-March) of the next fiscal year, then the impact would be quite serious.

Government expenditure still accounts for about 20 per cent of gross domestic product. If this engine sputters, it will hurt the overall economy. So it is in the best interests of all the politicians and key officials of independent institutions to strike a compromise as soon as possible in order to bring the political impasse to an end. This compromise will require each party to make a sacrifice. Otherwise the country cannot move forward. The whole world is watching how Thailand gets itself out of the political quagmire created by the leadership crisis of Prime Minister Thaksin Shinawatra.

In the mean time there is plenty of bad news. Oil prices are rising. Inflation has not subsided yet. Interest rates may have to rise further to contain inflation. Consumer demand is weakening. Private investment is also slackening. Thanong has indicated that the second quarter and third quarter of this year should witness a slowdown of the Thai economy. He bases his view on the performance of the first quarter, whose growth was derived largely from inventory depletion rather than from new investment. If this proves to be the case, it will be tough for the economy to pick up steam. Economic growth has been revised downward to around 4 per cent or slightly higher. It's time to bite the bullet.

However, this is election time. The incumbent Thai Rak Thai government would like to salvage the momentum of the economy by promising to implement some of the Bt1.7-trillion mega-projects. The caretaker Cabinet has approved three mass-transit projects in Bangkok and a plan to acquire some 2,000 NGV public buses in the capital.

As soon as he chaired the Cabinet meeting on Tuesday after a several weeks on leave, Thaksin immediately went into high gear by promising to throw billions of baht here and there in order to revive the grass-roots economy. It is highly questionable whether a caretaker Cabinet can still throw the money around like this. It is also counterproductive to the monetary authorities' attempt to rein in inflation. Moreover, when it really comes to implementing these mega-projects, critics and legal experts are also up in arms. They are consulting the Constitution as to whether a caretaker government is in a position to implement key policies or programmes that have a huge impact on the country.

The Thai Rak Thai government has been in a caretaker role since late February. During all this time we have had a sitting-duck government in office, and the whole country is stuck in the mud. But not to worry: the Thai economy is on autopilot. Fortunately we still have a strong export sector, and the Bank of Thailand is doing its job pretty well. The sooner the political turmoil is brought to an end, though, the better it will be for the country.