The SCB Economic Intelligence Center (SCB EIC) has raised its 2016 growth forecast for Thai GDP to 2.8%, but it warns that the country's economy still faces domestic risks.
The upwardly revised figure follows a better-than-expected first-quarter economic expansion and positive trends in the tourism sector, which appears set to grow throughout the year, SCB EIC said in a release.
The research arm of Siam Commercial Bank earlier estimated Thailand's economic growth at 2.5% this year.
Its latest GDP forecast, however, is still below the central bank's projection of 3.1% for 2016.
Growth in tourism and government support are the main driving forces of the Thai economy this year. The tourism sector saw good growth in the first quarter and is likely to continue expanding, with a higher rate of spending per person, the research firm said.
SCB EIC also revised up its estimates for tourist growth in 2016 to 15% from the previous projection of 9%.
The government's accelerated disbursements and regional financial support measures also played a significant role in the economy's growth in the first quarter.
The research firm envisions public investment in infrastructure megaprojects playing a bigger role throughout the year, resulting in the continued stimulation of private investment growth.
GDP growth for the January-to-March quarter unexpectedly registered at 3.2%, the fastest pace in three years.
SCB EIC, however, voiced concerns that the Thai economy still faces the risk of slowing down as some real estate stimulus measures have expired.
The budget for government consumption and stimulus measures has also dwindled after accelerated spending earlier this year.
In addition, the economy faces pressure from the limited purchasing power of the private sector, which significantly affects economic growth. Household spending is likely to be sluggish as household income is affected by a drop in labour hours across many sectors.
Furthermore, income in the agricultural sector has fallen as a result of low commodity prices, which have yet to recover, as well as lower production capacity due to the drought.
At the same time, household debt remains high.
"SCB EIC sees risks related to purchasing power as the main reason private consumption, which is sensitive to government stimulus measures, is struggling to recover," the research firm said.
Risks from fluctuations in global financial markets have also increased.
Capital flows are more sensitive to developed countries' monetary policies than in the past. Potential changes in monetary policies through the rest of the year, including Japan's additional economic stimulus measures and a likely interest rate rise by the Federal Reserve, remain important risk factors for the global economy.
As for Thailand, the research firm forecast the Monetary Policy Committee to keep the rate unchanged at 1.5%, with the baht likely to weaken to 37 per US dollar towards the end of the year.
In the meantime, Credit Suisse is sticking to its sub-3% economic growth view for Thailand this year.
"We remain cautious on GDP growth for the rest of this year despite some positive developments on private consumption in April, as we project exports and private investment will remain weak," Santitarn Sathirathai, head of economics and strategy for Southeast Asia and India at Credit Suisse, said in a research note.
"We still think the consensus forecast of 3% and the Bank of Thailand's expectation of 3.1% are probably too high. We expect growth to be weaker in the second half than in the first half."