BANGKOK, Oct 31 (Reuters) - The Thai economy has struggled free of recession, but latest data is hardly encouraging for a government that is banking on a recovery in slumping exports to offset the heavy cost of populist policies aimed at preserving its power.
Exports, which account for more than 60 percent of the economy, fell 6.3 percent in September from a year earlier and private consumption dropped 1.3 percent from August. Private investment remained flat, according to Bank of Thailand (BOT) data released on Thursday.
Gross domestic product data will be released on Nov. 18, and the central bank said on Thursday it will show Thailand making a tentative recovery from its first recession in five years.
Mathee Supapongse, senior director of the Bank of Thailand's macroeconomic and monetary policy department, said Southeast Asia's second largest economy would show quarter-on-quarter growth in the three months through September, ending the technical recession it entered in the first half of the year.
"We may not see any dramatic improvement yet," Supapongse, told a news conference.
The trade, consumption and investment figures hardly inspire confidence, however, and do little to ease the multiple problems faced by Prime Minister Yingluck Shinawatra's government.
Analysts reckon the government will need to spend to strengthen the recovery. The government says its fiscal position is strong, but spending on populist schemes is jeopardising chances of meeting its goal for balancing the budget.
Pulling the plug on a rice price guarantee scheme for farmers might help stem the losses of billions of dollars of state funds, but Yingluck would risk losing crucial support from her rural vote bank by doing so.
Farmers helped Yingluck sweep to power in 2011, when she promised to bring back the subsidies and handouts that helped her brother Thaksin Shinawatra win two terms in office.
The rice policy has been a disaster, however, with losses of 136 billion baht ($4.38 billion) in the 2011-2012 crop year. After that, the government ceased reporting the scheme's losses, though former central bank governor and finance minister Pridiyathorn Devakula recently estimated the total at 425 billion baht.
Weak external demand for the high-priced grains has left Thailand with as much as 17 million tonnes in storage. Shipments for the nine months through September were down 0.5 percent in value terms year-on-year, after a 28 percent fall for the whole of 2012.
"The government underestimated the global economic conditions when it started the rice pledging scheme and now it can't back down," said Kan Yuenyong, director of the Siam Intelligence Unit think tank.
"They're betting they can prolong it and pretend nothing's happening. The government is facing some strong opposition forces right now and it doesn't want to lose its voter base."
Midway through her term, Yingluck needs to hold on to her rural support base more than ever.
The next election is due in 2015. But, opposition is mounting against a controversial amnesty bill now being debated in parliament that critics say is aimed at getting a clean slate for her self-exiled brother Thaksin, who was jailed in absentia in 2008 for abusing his power while in office.
The government's latest policy, a tax rebate for first-time car buyers, a move at gaining new ground in winning urban middle-class support, has also backfired.
Auto sales dropped 28.5 percent in September from the same period a year earlier, with demand slowing from May in the wake of 81 percent sales growth on 2012, when a record 1.44 million new cars were sold as buyers raced to place orders before the scheme expired.
About 10 percent of orders made through the scheme were cancelled as the economy began to slow after robust growth of 6.5 percent in 2012, which followed 0.1 percent growth in 2011 when Thailand was battered by its worst floods in half a century.
The central bank last week cut its 2013 growth forecast to 3.7 percent from 4.2 percent seen in July and slashed its 2014 estimate to 4.8 percent from 5.0 percent.
Political analysts and the opposition say the government is less preoccupied with the economy than it is with the amnesty bill, which if passed would benefit not only Thaksin, but his opponents in the military that overthrew him in 2006.
"One man's personal agenda is driving the political agenda and that's driving the economic agenda," Korn Chattikavanij, a former finance minister and lawmaker with the opposition Democrat Party, told Reuters. "Their entire focus is on Thaksin."
What could lift the country out of recession is sustained growth of tourism and a recovery in exports, which the Bank of Thailand on Thursday said were "fragile".
It has projected exports to grow just 1 percent in 2013, having started the year with a forecast of 9 percent growth.
However, it expects 7 percent export growth in 2014 as global demand recovers for the agricultural products, automobiles and hard drives that Thailand produces.
It also wants to stimulate the economy with 2 trillion baht of infrastructure spending, mostly via loans, although that is facing legal hurdles, with the opposition calling for the Constitutional Court to intervene.
A timely global economic recovery, however, is not guaranteed, neither is political stability in a deeply divided country. Thaksin has proved to be a lightning rod for turmoil and has powerful enemies among the royalist elites and the army, who have previously managed to mobilise urban middle classes in protests to bring down his governments.
The economy might not be the only problem it has to tackle.
"The opposition and the elite are gathering support and gaining momentum. Nothing will ignite just yet, but if the economic conditions worsen and that affects the middle classes, the government could have a problem on its hands," said Kan.
(Editing by Simon Cameron-Moore)