* Domestic car sales down 26.2 pct y/y in April
* Auto sales seen below target this year as economy slows
By Kitiphong Thaichareon and Orathai Sriring
BANGKOK, May 25 (Reuters) - A slump in car sales in Thailand reached two years in April, while business sentiment hit a seven-month low, the Federation of Thai Industries said on Monday.
While a military coup a year ago ended months of political unrest, Southeast Asia's second-largest economy is suffering from other drags that prevent it from regaining traction.
Low commodity prices and a drought have hurt farmers' income. Banks are cautious to lend, while the junta's campaign against corruption has had the unintended effect of slowing government spending at a time when faster spending is needed.
"The industrial index fell quite a bit and in every part of the country, reflecting problems in the farm sector, which needs a boost from the government," FTI Chairman Supant Mongkolsuthree told reporters after releasing the April business sentiment survey.
Its Thai industries' sentiment index has fallen for four straight months, and the index hit a seven-month low in April.
Exports, manufacturing, domestic demand and investment have all remained weak during the early months of this year.
A separate survey reflected frustration that the junta had so far failed to galavanise an economy that grew just 0.9 percent last year - the lowest since floods wrecked the economy in 2011.
The poll released a day earlier by the Suan Dusit Rajabhat University showed 81 percent of respondents were disappointed with the junta's management of the economy.
The automobile accounts for 10 percent of the economy, as Thailand is a regional vehicle production and export base for the world's top carmakers.
In April, domestic auto sales fell 26.2 percent from a year earlier and were 15.3 percent down for the first four months of this year, FTI data showed.
Surapong Paisitpattanapong, spokesman of the FTI's Auto Industry Club, warned forecasts for domestic car sales this year could be revised down to 850,000-900,000 vehicles from the previous forecast of 950,000, unless the government speeds up spending.
"The target is likely to missed, but that will depend on the pace of government investment spending," he said, adding projections would be reviewed in June.
Domestic auto sales have declined on an annual basis since May 2013, reflecting the fading effects of a government first-car subsidy scheme.
Sales surged 81 percent in 2012, the year the scheme ended, but fell 7.7 percent in 2013, before slumping 33.7 percent last year.
At least the FTI was able to report that the value of exports of cars and car parts rose 4.5 percent in the first four months of 2015 from a year earlier.
Thailand cut its economic forecasts last week by 0.5 percentage points to 3.0-4.0 percent for this year, but the country's central bank governor told Reuters that even 3 percent expansion in 2015 would be "a challenge." (Editing by Simon Cameron-Moore)