By Orathai Sriring
BANGKOK, Dec 3 (Reuters) - A week-long siege of Bangkok's main airports is over, but it will take much longer for Thailand to regain investors' confidence as political uncertainty adds to the gloom cast by a global economic slowdown.
The Bank of Thailand (BOT) slashed interest rates by a full point to 2.75 percent on Wednesday, saying the political turmoil was having a severe impact on the economy.
Economists welcomed the move but were not reassured.
"The risks to growth are still very strong and we cannot emphasise enough how the combination of economic and political uncertainty in the last quarter of the year played a detrimental role in the growth of Thailand, both in the immediate and medium term," said Carl Rajoo at Forecast in Singapore.
In a Reuters poll in late September, the median forecast for GDP growth in 2009 was 4.9 percent. By mid-November, that had fallen to 3.1 percent. Expectations now are much lower, although few economists venture a hard figure in such a fluid situation.
"We are still looking at close to 2 percent -- from a 2-3 percent range previously -- for 2009," said Rajoo at Forecast. "You need a proper functioning government during periods of economic instability."
Thailand has not really had that for months. Protesters from the People's Alliance for Democracy (PAD) occupied the prime minister's compound from August until this week, forcing the government to operate out of offices in Don Muang airport.
Somchai Wongsawat had to step down as prime minister on Tuesday along with many ministers after the courts said ruling parties had committed electoral fraud, but the same parties, in a different guise, still dominate parliament.
"It's too early to review our economic projections as the dust has not settled yet," said Thanavath Phonvichai, an economist at the Thai Chamber of Commerce University, adding he was keeping his 2009 growth forecast at 2-3 percent for now, after 4.0-4.4 percent expected for this year.
"We have to wait until Dec. 8 to see if the new PM is acceptable and if the PAD will come out again," he added. Parliament is set to elect a new prime minister on that date.
DESPONDENT
Government officials have been quicker to say how badly the protesters have hurt the economy. Finance Minister Suchart Thada-Thamrongvech says there may be no growth at all in 2009.
Business people committed to Thailand are despondent.
"Investments are put to the most attractive place, but Thailand has lost a lot of her attractiveness. Thailand does not enjoy stability and, for sure, not predictability," said Nandor von der Luehe, chairman of the Joint Foreign Chambers of Commerce in Thailand, which represents 10,000 foreign companies.
"Even after resolving the political standoff, it will take time to rebuild the reputation of Thailand," he said.
International Country Risk Editor-in-Chief Christopher McKee did not expect a rapid resolution, making a reference to former Prime Minister Thaksin Shinawatra, who was ousted in a coup in 2006 but whose allies still control the government.
"The underlying sources of instability will not dissipate soon ... In other words, the anti-Thaksin forces have won a battle but the larger conflict is far from over," he said.
Companies in the tourist sector, naturally, have suffered immediately from the airports blockade. Hotels in Bangkok say occupancy rates are half what they normally are.
Deputy Prime Minister Olarn Chaipravat said the damage to Thailand's image could cut tourist arrivals in half in 2009 from the 13.5 million now expected this year.
A million jobs were at risk, he said. Tourism directly employs 1.8 million people and brings in the equivalent of 6 percent of GDP.
Other sectors are feeling the effect of months of conflict.
Top industrial estate developer Amata Corp said this week it had cut its 2008 land sales forecast by 33 percent and would cut land prices next year to try to win back customers.
Many of those customers are from the Japanese car sector. Thailand is a big production centre for global vehicle firms.
The value of foreign investments put to the Board of Investment by firms seeking tax breaks fell by 35 percent in the first 10 months of 2008 from a year earlier to $7 billion.
"When is business going to be back to normal? That's a tough question," said Maiyarat Pirayakoset, president of the Association of Domestic Travel.
"The thing to watch here is what will happen on Dec. 8," she said, referring to the date set for electing the prime minister.
"We still can't do much because no one knows for sure if PAD will come back and take the airport." ($1=35.5 Baht) (Additional reporting by Ploy Chitsomboon in Bangkok and Andrew Marshall in Singapore; Editing by Alan Raybould)