The country's Consumer Confidence Index (CCI) fell to its lowest level in five years last month, because of political uncertainty and rising oil prices, with no positive factors for recovery in sight, centre director Thanawat Polvichai said yesterday.

Thanawat said a lower interest rate was the only way to drive the economy, which was now sluggish, because enterprises and consumers had suspended their spending.

The CCI dropped to 77.6 points - the lowest since April 2002 - compared with 78.5 in March 2005. Based on a survey of 2,249 respondents, other indexes that relate to consumer confidence, such as employment opportunities and future income, also dropped to their lowest levels in several years.

"The continued drop of the index will directly hit the country's economic growth, because people are afraid to spend their money or expand investments," he said. The index for the overall economic outlook fell from 72.8 points in March to 72.1 last month. The Confidence Index for employment also dropped slightly, from 74 points to 73, while the Confidence Index for future income retreated from 88.6 points to 87.7.

An index below 100 points shows weak consumer confidence. "Consumers are highly concerned about a fresh round of rising oil prices and political instability," said Thanawat.

Domestic retail oil prices increased Bt1.20 to Bt2 a litre last month. In addition, rumours of the dismissal of both the prime minister and his Cabinet have reduced consumer confidence. People are worried about uncertain economic policies.

Other negative factors affecting consumer confidence include the Bank of Thailand's announced downward revision of the country's economic forecast, from 4-5 per cent before to 3.8-4.8 per cent. Serious insurgent activity in the deep South and the appreciation of the baht have also damaged consumer confidence.

More than half the respondents shared these views, saying it was not a suitable time to do anything, including invest, travel or buy a new car or home.

The centre further predicted the index would decrease until the third quarter, due mainly to the same volatile factors. The situation should improve in the fourth quarter, because a general election has been set for late December.

The election will improve Thailand's image and convince both foreign and Thai investors to expand their businesses, which would boost economic growth.

"Without a certain election date, Thailand's economic sluggishness will continue into next year and be less than 4 per cent," he said.

Petchanet Pratruangkrai

The Nation