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By Vithoon Amorn

Written by: Staff

BANGKOK, Apr 2 (Reuters) Thai Prime Minister Thaksin Shinawatra, assured victory in an election boycotted by major opposition parties, faces onerous challenges and political uncertainty eroding economic growth this year.

Thai gross domestic product growth will probably ease to 3-4 percent in 2006 from 4.5-5.0 per cent expected early this year and compared to 4.5 per cent expansion in 2005, academics said today.

''The worst scenario is if Thaksin continues to ignore the middle class and tries to muzzle the media after the election,'' said political scientist Somjai Phagaphasvivat of Thammasat University.

''We may find ourselves sliding to a Philippine situation,'' he said. ''Achieving 4 per cent growth is becoming a challenge and growth of less than 4 per cent is a clear possibility.'' The anti-Thaksin campaign exploded in January after the prime minister's children sold a controlling interest in the telecoms empire he founded to Singapore's Temasek Holdings [TEM.UL] for a tax-free 1.9 billion dollars.

Thaksin's critics vowed to maintain protests after the poll to put pressure on him to resign and analysts say demonstrations may turn violence if he opts to crack down.

''At this point, I don't rule out the possibility that the post-election situation may deteriorate to the point requiring military interventiion,'' Chulalongkorn University economist Lae Dilokvidhyarat said.

Thaksin faced a dilemma of either suppressing big street protests and risk provoking bloodshed, or sitting back and watching the demonstrations grow, Lae said.

''The other viable option is for him to step aside and let one of his deputies take over,'' he said.

Analysts say Thaksin's ambitious 44 billion dollars infrastructure projects planned for completion by 2009 and pending free-trade talks with trading partners such as the United States and Japan are likely to suffer.

No one expects a swift resolution after an election which cannot satisfy the constitutional requirement that all 500 seats be filled in order to form a new government.

An opposition boycott and a requirement that an unopposed candidate get 20 per cent of the eligible vote to win guarantees that.

''Thailand will go through an economic-policy vacuum during months of uncertainty after the election with no fiscal and economic policy initiatives taken,'' said economist Thanavath Phonvichai of the University of the Thai Chamber of Commerce.

The economy could use a boost from government investment in infrastructure projects, he said. These might not necessarily be delayed if Thaksin quit and his deputy, former Finance Minister Somkid Jatusripitak, took over.

''It's obvious that the mega projects could boost economic growth. But given current public sentiment against foreign economic domination, they could probably proceed faster through joint ventures with local partners,'' Thanavath said.

''Some mega projects could still see progress by the fourth quarter if the Thai Rak Thai government keeps up efforts to launch them.'' Thanavath expected the economy to grow 4 per cent this year.

Somjai of Thammasat University said that, apart from political uncertainty, slowing domestic consumption and declining tax revenues would force Thaksin to adjust infrastructure plans.

''Thailand will face dual fiscal and current account deficits for the first time this year since 1997. GDP growth may end up 1.5 percentage points lower than originally projected,'' he said.

''With the expected fiscal deficit, Thaksin would have less room to carry out his populist policies.'' REUTERS CH BST1750

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