Politics still depresses Thai consumer confidence.

On May 1, 2007, Thailand's Bureau of Trade and Economic Indices released the country's official consumer confidence index for April 2007 showing a slight increase, as illustrated in the graph above. On May 10, 2007, however, The University of the Thai Chamber of Commerce reported on the results of its own survey of Thailand's consumer confidence with its index at a five year low. Source: Agence France-Presse (AFP).?The University's sample size was well over twice the size that of the government's.

Two recent Thai political developments are emblematic of forthcoming events that undoubtedly exacerbated the decline in consumer confidence so vividly illustrated in the graph.

On April 26, 2007, the Associated Press (AP) (and others) reported that the first draft of Thailand's new constitution was formally submitted to the country's parliament and other institutions. The event was paralleled by a large demonstration of Buddhist monks who were campaigning-complete with nine elephants-in favor of making Buddhism the state religion of Thailand.

The reason for highlighting the two developments is to emphasize the impact of the country's unsettled political situation on its economy. Coupled with the ongoing military struggle with radical Muslims in Thailand's southern provinces, the need for political stability becomes obvious.

In its analysis of the March 2007 consumer confidence survey, the Bureau of Trade and Economic Indices made six recommendations to the government. Two of the recommendations had to do with mitigating the country's political and economic chaos. One recommendation urged the government to pursue alternative sources of energy. Another recommendation had to do with rising prices.

Consumers' worries about the value of the Bhat were enough to elicit a fifth recommendation related to managing the currency's value. And a final recommendation was aimed at ensuring food security with the Bureau asking the government to consider protecting the country's agricultural sector from environmental shocks.

In a speech before the Japanese Chamber of Commerce in Bangkok on March 16, 2007, the Governor of the Bank of Thailand (BOT) acknowledged Thailand's difficulties but spoke, as well, of continuing growth. She said, "Despite the negative environment, the overall economic performance was quite satisfactory. The economy proved to be resilient, as the growth momentum continued while overall economic stability improved."

According to International Monetary Fun (IMF) statistics, Thailand's GDP grew 5.0 percent in 2006. The IMF estimates that 2007 GDP will expand 4.5 percent in 2007, and 4.8 percent in 2008.

The IMF statistics tend to support the BOT Governor's statements.

An April 11, 2007 press release from the BOT acknowledged the country's difficulties and announced a change in monetary policy to deal with the slowing economy. The BOT reduced its key interest rate (the repo rate) from 4.5 percent to 4.0 percent. "As inflation in the first quarter moderated sharply, the MPC [Monetary Policy Committee] viewed that even though crude oil prices were expected to be higher, inflation would remain at a low level, due partly to subdued domestic demand."

The subdued demand is clearly prefaced by the graph on page 1.

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