BANGKOK (Reuters) - Thailand's Constitutional Court on Wednesday gave Prime Minister Yingluck Shinawatra until early May to defend herself against charges of abuse of power, as the central bank warned that the political crisis threatened another cut in its growth forecast.
The charges relate to the transfer of National Security Council chief Thawil Pliensri in 2011, which opponents say was designed to benefit her Puea Thai Party. If found guilty, Yingluck could be forced to step down and some legal experts say the whole government would have to go with her.
Yingluck, who heads a caretaker government with limited powers, has been undermined by six months of street protests aimed at toppling her government as well as various legal challenges against her, which have intensified since February.
The central bank has slashed its economic growth forecast for 2014 because the unrest has hit tourism and business confidence, and it said on Wednesday growth would probably be even lower than its latest estimate of 2.7 percent.
Last October, just before the protests flared up, the Bank of Thailand (BOT) had forecast 4.8 percent growth.
Even so, its monetary policy committee left interest rates unchanged at a policy meeting on Wednesday, wanting to see the impact of quarter-point cuts in November and March that took the benchmark rate down to 2.0 percent.
"The BOT's decision to stay on hold doesn't come as a surprise to us and there is only so much that further rate cuts can do to support the economy when the main drag is coming from a slide in consumer confidence and business sentiment," said Benjamin Shatil, an economist at JP Morgan in Singapore.
Gundy Cahyadi, an economist with DBS Bank in Singapore, said export growth was still providing some support, but the question was for how long. "One wonders if we can continue to have business as usual without a functioning government in place."
THREAT OF VIOLENCE
Security chief Thawil was reinstated to his post in March but the Constitutional Court accepted a case brought against Yingluck by 27 senators who argued his removal had violated the constitution.
"The prime minister will be given until May 2 to present her defence and gather further evidence," Somrit Chaiwong, a Constitutional Court spokesman, told Reuters.
The court will then hear witnesses on May 6 and its judgment could come any time after that.
A verdict that removes Yingluck will escalate tension between her supporters and the anti-government protesters. Some fear an increase in violence that could prompt intervention by the coup-prone military.
A long-running crisis broadly pits the mostly poorer supporters of Yingluck and her brother, former premier Thaksin Shinawatra, against the Bangkok-based middle class and the conservative establishment. Thaksin was ousted by the army in 2006 and has chosen exile rather than accept a jail term handed down in 2008 for abuse of power.
The protesters want to end Thaksin's political influence and set in motion broad political reforms that would prevent parties loyal to him from running for office again.
A February 2 election was disrupted by the protesters, who stopped candidates from registering and blocked polling stations. As a result, a court ruled the election void and the Election Commission has said the earliest date for a rerun is July 20, but even that looks optimistic.
Despite occupying key government ministries for weeks at a time and bringing parts of the capital, Bangkok, to a halt until retreating to a city park in March, the protesters have failed to achieve their aim of bringing down the government.
They are now looking to the Constitutional Court and the National Anti-Corruption Commission (NACC) to remove Yingluck. Her supporters believe the courts and other state bodies are biased against her and Thaksin.
Amongst the charges she faces is one of dereliction of duty. She is the nominal head of a state rice-buying scheme that critics say is riddled with corruption and has run up huge losses.
The NACC, which brought that charge against her, is expected to deliver its ruling in May. If found guilty, she could be removed from office and may get a five-year ban from politics.
(Writing by Amy Sawitta Lefevre; Additional reporting by Orathai Sriring; Editing by Alan Raybould and Robert Birsel)