The university said that by the end of the year, the country's current-account deficit should reach US$2.19 billion (Bt83 billion), with a total trade deficit of $6.48 billion.

By comparison, Thailand's current-account deficit stood at $3.71 billion last year, while its trade deficit reached $8.57 billion.

Earlier this year, the government was concerned Thailand might face a trade deficit as high as US$7 billion or above by the end of the year, due to the large number of imports needed for the construction of its mega-projects.

However, Centre for International Trade Studies director Aat Pisanwanich said yesterday that although the current-account and trade deficits would be lower than they were last year, the government faced immediate problems from the slowdown in export and import volumes and investment growth.

He said the slowdown in domestic and foreign investment, largely because of the ongoing political stalemate, would bring down the Kingdom's export growth in the long run.

Meanwhile, Federation of Thai Industries (FTI) chairman Santi Vilassakdanont said the industrial index in May had been in relative decline, because of higher oil prices, increased interest rates and the political uncertainty. As a result, the industrial index dropped below 100 points for the second consecutive month.

Santi said the industrial index in May was only 94.3, compared with 94.5 in April. An measurement below 100 points reflects a lack of confidence in the industrial situation by operators. The factors for calculating the index are purchasing orders, sales volume, production volume and production costs.

He said industrial operators say they are affected most by higher oil prices, rising interest rates and the political uncertainty. Meanwhile, Chinese producers churning out cheap goods snatched the market share from local manufacturers.

All of these factors affect the industrial

confidence index. In a separate meeting,

Aat said foreign investors had been shifting their investment from Thailand to other countries, such as Vietnam, China, Malaysia and India.

The Board of Investment said foreign investment dropped 62.89 per cent to $128 billion in the first five months of the year, due to the political tensions in the country.

The level of investment last year was $346 billion, up 12.04 per cent from 2004.

He called for those responsible for the political instability to relinquish their power, in order to allow for a solution to the crisis and prevent the problem from spilling over into other parts of society, especially the economic sector.

"Negative factors like rising oil prices, exchange-rate fluctuations, rising interest rates, political uncertainties are the top worries that will have a chain reaction on the entire economic system of the Kingdom," said Aat.

Also, the centre said this year's growth in export volume was expected to be much lower than the government had expected. The centre predicts volume growth of 13.07 per cent, compared with the government forecast of 17.5 per cent.

Meanwhile, the value of export growth would was expected to be $125 billion, instead of the government estimate of $130 billion.

One key factor leading to the low export volume is the baht's appreciation, particularly in the second half of the year.

The chamber's predictions for the year was based on an oil price of $69.98 per barrel, interest and inflation rates of 5 per cent each and a baht exchange rate of 38.50 to the dollar.

FTI members, meanwhile, said they would prefer to see the baht level out at 39.03 to the dollar. However, now that the baht has risen to 38.07 to the dollar, the FTI is recommending that members discuss ways of limiting the risk from the rising currency with their financial advisers.

The FTI is organising a meeting for July 20 between a joint private-sector committee and the central bank governor on how to survive the current economic crisis.

Petchanet Pratruangkrai

The Nation