By Panarat Thepgumpanat and Jutarat Skulpichetrat
BANGKOK (Reuters) - Thailand reported progress in diverting floodwater round its capital into the sea on Friday but the prime minister instructed troops to protect key buildings as her government struggled to contain the worst flooding in 50 years.
After trying to hold the line for a week, the government opened some canals on Thursday to allow water to run through the inner city, carrying the risk of inundating some districts but relieving pressure on dikes.
But the danger was far from over, with heavy rain forecast next week, raising the risk of an intensification of a crisis that has killed at least 342 people since July and devastated industrialized areas to the north of Bangkok.
The floods are the first real test for the politically inexperienced prime minister, Yingluck Shinawatra, whose government has had to form uneasy alliances with the military and political rivals to coordinate the relief effort.
The problem was building even before she took office in early August and looks set to cost industry more than $3 billion, slashing economic growth this year.
The 44-year-old businesswoman is resisting calls to declare a state of emergency, which would mean deploying the army on the streets.
Yingluck opted instead to invoke a disaster law to grant her executive powers over state agencies and the military, arguing that a declaration of a state of emergency would be alarming and excessive.
"It would ruin investors' confidence, which is quite weak already," Yingluck told reporters at the crisis center.
"At this moment we can see that we (the government and the people) are cooperating very well to help us get through the problem. If I declare a state of emergency, I would be telling the world that we can't help each other."
She ordered the military to protect the city's two international airports, power plants, the water authority and royal buildings and ordered the transport ministry to handle traffic on Bangkok's normally chaotic, clogged roads to aid the delivery of food and water supplies.
Banks and offices in Bangkok's business districts were piling up sandbags in case canals burst.
"If the floodwater reaches Bangkok, we're looking at 5 to 10 times the damage we've already seen," Bangkok Bank's executive vice-president, Bhakorn Vanuptikul, told Reuters outside his bank's fortified headquarters in the central business district.
"The damage would be immeasurable because of the disruption to people's lives. That's why we're trying to continue operating."
Water now covers a third of Thailand's provinces, some 4 million acres (1.6 million hectares) in the north, northeast and center of the country, and a seventh big industrial estate was overwhelmed late on Thursday when flood barriers at the Bang Kadi park in Pathum Thani province about 50 km (30 miles) north of the capital were breached.
Supplies of bottled water have virtually disappeared from the capital's shops while other items such as noodles and toilet paper were also running out.
THUNDERSTORMS
The government's effort to steer the water around the east and west of the capital has had some success, its crisis center said, but people in the northern Don Muang and Lak Si districts were told to move belongings to higher floors.
Viphavadi-Rangsit road, a main road from the north into the heart of the city, is the biggest concern, with fears that canals could overflow onto it, said Bangkok Governor Sukhumbhand Paribatra.
The new term for schools in seven northern districts of the city, scheduled for November 1, would be delayed indefinitely, Sukhumbhand added.
The sun was shining in Bangkok on Friday after some heavy rain the previous evening. The weather was expected to be clear on Saturday, with light rain Sunday and thunderstorms in the days after, according to the Meteorological Department.
The central bank has put the damage to industry at more than 100 billion baht ($3.3 billion) on Thursday and its governor, Prasarn Trairatvorakul, said 2011 economic growth could be closer to 3 percent than the 4.1 percent it forecast. Finance Minister Thirachai Phuvanatnaranubala said growth might be barely 2 percent.
The Commerce Ministry said it expected exports to fall 13 percent in the fourth quarter compared with last year.
Thailand is a big regional hub for the world's car makers and most are suffering disruption, either because their plants are flooded or, more often, because parts makers have had to close and the supply chain has been disrupted.
The output of Japanese car makers has fallen by about 6,000 units a day because of the flooding. Germany's Daimler AG said late on Thursday it had halted car production because of the threat of flooding.
Thailand is the world's top rice exporter. Traders and analysts said it was too early to assess the damage, but estimated about 2 million tonnes of milled rice may have been ruined, with delays to the loading of 100,000 tonnes of rice.
(Additional reporting by Apornrath Phoonphongphiphat; Writing by Alan Raybould and Martin Petty; Editing by Robert Birsel)
