Thai Leader Sees Unrest Keeping Economy Down

Protesters Disrupt First Policy Speech

BANGKOK, Dec. 30 -- Thailand's new prime minister used his delayed maiden policy speech to lawmakers Tuesday to warn that the stalled economy is unlikely to recover as long as the country is held hostage by political conflict.

But the challenges facing Abhisit Vejjajiva's administration were thrown into stark relief when thousands of his opponents surrounded parliament, forcing him to deliver his speech in the Foreign Ministry.

"Political conflicts that have spread to civic groups could push the economy, along with the tourism industry, into recession if action is not taken quickly to resolve them and revive confidence among investors and foreign tourists," Abhisit said.

"These conflicts are the country's weakness, especially at a time the world economy is entering its worst crisis in a century," he said.

The Oxford-educated Abhisit is Thailand's third prime minister in four months.

He came to power after his Democrat Party managed to persuade enough members of the previous ruling coalition to defect when their leader, former prime minister Somchai Wongsawat, was banned from holding office because a court had found his party guilty of vote buying.

But supporters of Somchai and his political sponsor, former prime minister Thaksin Shinawatra, question the legitimacy of the new government and have vowed to continue demonstrating until Abhisit dissolves parliament and calls fresh elections.

For most of this year, the deep divisions between the country's conservative middle-class elites and its rural poor paralyzed the ability of Abhisit's predecessors to govern a country sliding into an economic quagmire.

Many had hoped that Abhisit, who is more acceptable to the yellow-shirted protesters who have caused so much disruption in recent months, might be able to take the country forward. However, his appointment appears to have galvanized the opposition of a different group, which favors red shirts.

Abhisit's opponents said Tuesday they may challenge the constitutional legality of his giving a speech outside parliament, as he did Tuesday under pressure from protesters.

Thailand relies on exports and tourism for about 70 percent of its national income. Its economy is being squeezed by the twin threats of the global slowdown, which has slashed demand for its main exports, and the damage done to investor confidence by the past six months of domestic political unrest, culminating in the closure last month of the country's two busiest airports.

The Bank of Thailand said Tuesday that it expects the economy to contract by 2.5 percent in the fourth quarter compared with the third quarter, in part a reflection of a 17 percent drop in exports in November.

The six months of virtual political paralysis that preceded the airport closures prevented successive governments from implementing any effective program to counter the slowdown, exacerbating the problems that Abhisit now faces.

The new prime minister is expected to launch an ambitious $8.7 billion stimulus program to try and restart the stalled economy. He warned Tuesday that unless the government is able to take prompt action, the official unemployment rate could double.

However, analysts say that given Thailand's large informal labor sector, the fallout from the crisis could actually be much worse than that.