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Economists: Thailand's Political Uncertainty May Undermine Economy  

The Thai economy, already forecast to contract in 2009, faces more pressure because of anti-government protests. Political analysts and economists warn political fighting could delay key economic stimulus packages.

Supporters of former Prime Minister Thaksin Shinawatra have surrounded the main government office building for a week. As many as 30,000 people, most wearing red, join the rallies each day. The protests are an echo of anti-Thaksin protests held for six months last year.

Each night, Mr. Thaksin speaks to his supporters by video link, urging them to force Prime Minister Abhisit Vejjajiva to call elections.

Mr. Abhisit came to power in December after legal problems forced out a pro-Thaksin government.

Mr. Thaksin, ousted from power in coup in 2006, fled Thailand last year to avoid corruption charges.

The new protests come at a bad time for Thailand, which saw its economy badly hurt last year, when anti-Thaksin protesters blockaded the Bangkok airports, crippling the tourism industry.

The Asian Development Bank expects the economy to contract by two percent this year. But Jean Pierre Verbiest, the bank's Thailand director, says political instability will delay the government's $3-billion stimulus package.

"Obviously, with the economy in Thailand the main risk is the political. If you have major disruptions in leadership at this stage it would have quite a strong impact," said Verbiest. "Internally, due to the political situation, I guess you could have growth falling further to four to five percent easily."

Thailand, heavily dependent on exports for growth, faces its most severe downturn in a decade. The recession is expected to cost two-million people their jobs.

Thai Government Pension Fund chief economist Arporn Chewrekrengkai says if the government is forced out, a pro-Thaksin opposition party, Pheu Thai, will benefit.

"Those measures and those policies that should be delayed, there is uncertainty because whether who will become the new government," said Arporn. "And if there is a new election it is likely - with plenty of money - Pheu Thai may win the election."

The government says it is prepared to talk with Mr. Thaksin to end the siege at the government house and avoid economically damaging political unrest.

Some political analysts also say there is a risk the protests will turn violent, which could scare away foreign tourists and foreign investors.

Thai politics have been unsettled for more than three years. While Mr. Thaksin is popular among farmers and working-class voters, many in the middle and upper classes accused him of corruption and abuse of power. Thailand has its fourth government since 2006, when Mr. Thaksin was ousted.