The pessimistic outlook will inevitably affect demand for precious metals such as gold, silver and platinum used in jewellery production, said director-general Sanit Vorapanya of the commerce ministry's department of export promotion.

However, the drop in exports is unlikely to undermine Thailand's position as a regional centre for the industry. Despite the fall in exports and short-term bearish outlook, jewellery is still ranked among Thailand's top 10 foreign exchange earners, Sanit said. ``It is unlikely that the (export) sales this year will reach the target of $2.0 billion because of the economic downturn,'' he told Reuters. ``But the slow-down will in no way hamper or undermine Thailand's position as a leading regional hub of diamond, precious stones and the jewelleryindustry,'' he said.

Sanit was speaking ahead of the 28th World Diamond Congress to be held in Bangkok from July 26-29.

Thailand's precious stones and jewellery exports during the first three months of 1998 totalled $356.3 million -- a 23.6 per cent drop from the corresponding period in 1997.

But in baht terms, the value surged 41.8 per cent to 16.99 billion baht. The country is considered one of the world's top precious stone exporters and has a big diamond and stone cutting industry. The fall in demand for precious stones has resulted in a drop of demand for precious metals. During the first quarter of 1998, Thailand imported 3.9 billion baht worth of gold, silver and platinum versus 4.4 billion baht in the same period last year.Of the total imports, 77.6 per cent were gold, 19.0 per cent were silver and 3.4 per cent platinum. The major sources for gold included Australia, Germany, Switzerland and Israel.

Silver was imported mostly from South Korea, Switzerland and Britain while platinum was boughtfrom Japan, Germany, Singapore and Italy.

Vice- president Savaraj Sachchamarga of Bangkok Diamond and Precious Stone Exchange told Reuters that the lower-than-expected tourist turnover also affected sales.

``The number of tourists from Hong Kong and Japan have dropped. These people used to have high purchasing power...,'' he said.

But Savaraj said he is convinced that Thailand will be able to retain competitiveness in this industry in a long run despite some short-term hiccup.

``What constitutes Thailand's competitiveness is the craftsmanship in which we excel and is accepted internationally as well as the relatively low cost of production,'' he added.

He said the fact that Thailand is hosting the 28th World Diamond Congress later this month will enhance the profile of the country as one of the top players in the precious stones and jewellery industry.

``This is a good opportunity to show-case Thailand as a fore-front player in the diamond and jewellery industry...moreover, we want to introduceparticipants to local business operators so that they know that not only can they buy the products from here but they can also invest in Thailand,'' he said.