Prime Minister Thaksin Shinawatra Tuesday ordered an importmonitoring panel to keep a close watch on the Kingdom's deteriorating trade balance following the largest current account deficit in almost eight years - US$942 million (Bt36.07 billion), recorded in January this year.

He was raising his concern at the Cabinet meeting, at which he was informed that imports of capital goods such as machinery, medical equipment and gold, coupled with the higher oil prices, resulted in the trade deficit in January.

Although the prime minister said the situation remains under control, he added that the current account

deficit should set off alarm bells for policy-makers, who would have to focus on economic stability at a time when the economy is slowing down.

Foreign investors Tuesday were alarmed by the big current account deficit, dumping net Bt685 million worth of Thai stocks.

At this point, there are two schools of thought on how Thailand should proceed amid the deteriorating current account.

The first school of thought, represented by the prime minister and his advisers including Vijit Supinit, holds that a small current account deficit would be good for the Thai economy as the Kingdom is shifting its gear toward investment as the engine of growth. If the current account deficit does not exceed 2 per cent of the

gross domestic product, this should be sustainable.

Another school of thought, represented by MR Pridiyathorn Devakula, the governor of the Bank of Thailand, as well as Virabongsa Ramangkura and Kosit Pampiemras, still doubts whether Thailand can afford to run a persistent current account deficit, without harming investors' confidence and the baht's stability.

However, going forward, Thailand would eventually need to run a current account deficit - a gap between investment and domestic savings - because it needs to continue to post a decent growth rate of 5-6 per cent.