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It looks increasingly so. CitiGroup in a report yesterday, revised downward the target of the SET Index from 990 to 925 over the next 12 months.

"The latest gathering by the People's Alliance for Democracy (PAD) to protest against the government's attempt to amend the Constitution helps affirm our view that the political situation is turning to the worst-case scenario. The gridlocks faced in the months prior to the September 2006 coup are clearly visible," the CitiGroup report said.

Business leaders have been watching political developments with growing concern, fearing the PAD's rallies might spin out of control to hurt the economy and consumer confidence at a time when Thai growth appears to be gaining momentum. Thai farmers are enjoying an extraordinary year from higher crop prices in spite of higher inflation. They are going out to buy motorcycles and other consumer products, which in turn boosts the economy.

But with the PAD's rallies and a possible confrontation with the supporters of the constitutional rewrite, nobody can guarantee whether Thai politics can achieve stability any time soon. The PAD is demanding the government halt its attempt to amend the Constitution, which is aimed at whitewashing the corruption cases against former prime minister Thaksin Shinawatra.

Supporters of Thaksin will not budge easily in this power play because both sides are preparing to face the endgame.

In the meantime, the Samak government is beginning to react to the higher oil prices. In one swoop, it attempted to help out supporters via intervention in energy prices (LPG and diesel). The Energy Ministry has asked the oil companies to lower their refining margins for diesel by US$5 (Bt161) a barrel. This has led the energy sector to lose almost Bt22 billion in market capitalisation.

Bus and mini-van companies are asking for a rise in their fares. But the government is hesitating to allow them to do so. The transport companies have threatened to stop operating their bus services. This would throw the Thai economy into hard times as rising oil prices hurt consumers directly, unseen since the oil shock in the 1970s.

If oil prices were to top $200 a barrel by year-end, as many have predicted, the Bank of Thailand and other regional central banks might be forced to tighten their interest rates like crazy to halt the price rise. The BOT won't allow core inflation to breach 3.5 per cent. But the tendency forward is that this core inflation might be breached without a tightening to rein in the inflationary pressure. A stronger currency is needed during this time to tame inflation.