Thai political tensions seen peaking by June

Bangkok, March 4: Rising political tensions in Thailand willpeak by June and determine whether a shaky post-coup government cansafely steer the country into year-end elections, a top politicalanalyst says.

Despite a series of economic missteps by the military-appointedgovernment, foreign punters are eyeing Thai stocks again -- lured bycheap prices, interest rate cuts and a hope that the politics will workitself out.

But that optimism may be premature due to factors not fully pricedinto the market, Supavud Saicheua, head of research and managingdirector at Phatra Securities, told Reuters.

A new constitution that aims to reallocate political power,growing demands to lift post-coup restrictions, a looming drought and astruggling economy add up to a volatile April-June period.

The quarter could also see the outcome of graft probes againstousted Prime Minister Thaksin Shinawatra, and a court ruling dissolvinghis party, possibly provoking his supporters.

''It all adds up to a very tense situation going into the secondquarter,'' Supavud, 50, a US-educated economist who has had stints as asenior adviser in previous governments.

''The government needs to get through June and then we can probably muddle through until the elections''.

Last week's abrupt resignation of Finance Minister PridiyathornDevakula was the latest crisis for a government struggling to restoreconfidence eroded by controversial economic decisions, security fearsand political uncertainty.

His successor, to be named next week, takes over an economy that usually sees its slowest growth in the second quarter.

Exports are strong, but nervous consumers are not spending andprivate investment fell 0.6 per cent in January, the first contractionin five years.

A 25-basis point rate cut last week will likely be followed by anothercut in April as the Bank of Thailand tries to spur growth. But theimpact may only be felt after June, Supavud said. Phatra has cut its2007 GDP growth forecast to 3.7 per cent from a previous 4.4 per cent.The government expects 4.5 per cent. ''If the economy doesn't reviveand the government keeps falling in the polls, things will come to ahead,'' Supavud said.

Military Role?

Another factor to watch is reaction to a newconstitution being drafted by a military-appointed committee to replacethe 1997 ''People's Charter'' torn up by the coup leaders.

Supavud said political parties could be severely weakened toprevent another strong leader from winning a huge parliamentarymajority -- as Thaksin had, and is accused of using to sidestepindependent checks on the executive.

''The question is will people accept this transfer of power,'' hesaid, predicting a stronger political role for the bureaucracy ormilitary, which appears to be making moves already.

Media reports said last week the Council for National Security, asthe coup leaders call themselves, plans to appoint military officers asdeputy governors in Thailand's 76 provinces.

''That's clear to me the military will have fairly broad control over the country as a whole, not just security,'' he said.

A looming El Nino-related drought in the north and northeast couldalso give the government problems in former strongholds of Thaksin'sThai Rak Thai party.

''If there is drought and relief does not come quickly and thereis nothing to do on the farms, the chances of them marching to Bangkokincreases,'' Supavud said.

A frustrated countryside could sway a referendum on the charter,although if it is rejected, the military says it will choose one of 17previous constitutions and call elections.

''If the referendum is close or a rejection, it could beinterpreted as a vote for Thaksin if the new charter is meant to keephim from coming back,'' Supavud said.

Thaksin, living in exile, has ruled out a return to politics.

But a recent Thai Rak Thai rally, held despite a ban on politicalactivities, and the attempted launch of a new television station byformer party members -- it was blocked by state telecoms firms --suggests politics is heating up again.

''When I talk to clients they often say: 'It can't get any worse can it?'. I believe that it may,'' Supavud said.

Reuters>