The continued political uncertainty is damaging the economy, with consumer and foreign investor confidence - fundamental to economic growth - severely reduced, the chamber said yesterday.

The TCC made its call amid sluggish domestic consumption, with consumer confidence dropping to its lowest level in 64 months as a result of the uncertain political and economic situation.

The government should show its determination to control the expansion of political turmoil. Otherwise, the situation could degenerate into violence and damage economic growth, chairman Pramon Sutivong said.

"The political chaos is a priority concern for the business sector. The government must show it has the potential to solve the conflict soon," he said, adding that the economy could be hit hard if political conflict led to violence.

In the current environment, the chamber has confirmed its prediction that this year's economic expansion will be 3.5-4 per cent.

Due to Thailand's strong economic fundamentals, the economy could recover in a short time if the government found a way to clear the political turmoil, said Pramon.

Despite clear decisions in the electoral-fraud cases last month, the Consumer Confidence Index dropped to its lowest level in eight months, according to a special survey conducted by the University of Thai Chamber of Commerce.

It predicted a further decline through the fourth quarter in the absence of positive signals to boost consumer confidence.

The index dropped to 76.4 points this month from 76.9 in May.

The index was determined through polling 897 respondents in Greater Bangkok from June 9-12 about their feelings towards the electoral-fraud rulings.

Confidence in the overall economy decreased considerably, from 71.4 points in May to 71 this month.

Confidence in future income fell sharply from 87.1 points in May to 86.7, while the index on future employment opportunities dropped from 72.2 points to 71.6.

The TCC also indicated that expansion in private consumption had fallen in May to its lowest level in seven years, at 1.3 per cent.

Growth in foreign direct investment dropped to a five-year low at 2.4 per cent, and the construction sector contracted by 0.7 per cent. The government's May budget disbursement was 28.6 per cent lower than in the same month last year.

To form a concrete plan for increasing consumer confidence and ensuring economic expansion, Pramon said the chamber would next month talk with Prime Minister Surayud Chulanont, clarifying the problems for the government.

The UTCC also announced its regular monthly Consumer Confidence Index for May. Based on 2,233 respondents, the index dropped to 46.9 points from 77.6 in April.

Thanawat Phonwichai, director of the university's Business and Economic Forecasting Centre, said the political uncertainty was a major concern for weak consumer confidence.

He said consumer confidence was likely to drop to its lowest level ever in the coming months, as there were no positive signs giving it a boost.

Falling confidence caused people to feel reluctant to spend money or invest. More than 50 per cent of respondents said it was not a suitable time to invest, travel, purchase new cars or buy new homes.

Petchanet Pratruangkrai

The Nation