(Updates with background, details)
By Chalathip Thirasoonthrakul
BANGKOK, Dec 11 (Reuters) - Thailand's parliament is set to vote for a new prime minister on Monday, with the opposition Democrat Party favourite to emerge at the head of a weak coalition government as the economy flirts with recession.
Democrat Secretary-General Suthep Thaugusban said that trying to revive the export- and tourism-dependent economy, suffering a double blow from the global slowdown and months of domestic political strife, would be the number one concern.
"Our first priority is the economy. We need to restore foreign investors' confidence, luring them back to Thailand, making them confident of the country's potential," he told Reuters in an interview.
Acting Finance Minister Suchart Thada-Thamrongvech said the economy was expected to shrink 0.5-1.0 percent in the first quarter of 2009 from a year earlier and post no growth in the second quarter, putting it on the brink of recession.
Even though Suchart, part of the People Power Party (PPP) administration sacked by the courts last week, forecast a modest recovery in the second half, much will depend on the stability of the incoming government and its ability to use fiscal policy to stimulate growth.
If Democrat leader Abhisit Vejjajiva is elected prime minister, he is likely to command only a slender majority at the helm of a multi-party coalition including a renegade PPP faction.
The country is deeply divided after three years of political strife and he is unlikely to enjoy much of a honeymoon.
Suthep claimed the Democrats had the support of 260 MPs in the 480-seat parliament, whose numbers have been thrown into confusion by last week's dissolution of the PPP and two other minor parties and the banning of their leaders from politics.
It is still possible the Democrats' shaky alliance will fall apart before Monday's parliamentary session, leaving the door open for remnants of the banned PPP, now in a new party, to have a crack at forming a coalition.
Puea Thai, the new name for the PPP, has said it still has enough support to cobble together a coalition.
The prospect of a new government kept the stock market just in the black on Thursday, following a period of turbulence during which anti-government protesters blockaded Bangkok's airports for a week, stranding hundreds of thousands of tourists.
Foreigners were net buyers of Thai stocks for the first time in seven trading days.
Puea Thai is the latest incarnation of a party grouping allies of Thaksin Shinawatra, ousted as prime minister in a September 2006 coup and now living in exile.
He has been at the heart of Thailand's three-year political crisis, with Bangkok's royal and military elites pitted against him and his allies, who won the December 2007 election to end 15 months of army-backed government. (Writing by Nopporn Wong-Anan; Editing by Ed Cropley and Jerry Norton)