Despite rising hopes stemming from the 324.5-billion-baht stimulus measures, Thailand's economy this year is projected to grow by only 1.5% due to the slow recovery in domestic consumption and exports, says the World Bank.
But a rebound in tourism and increased public spending coupled with an export recovery would support next year's growth momentum reaching 3.5%.
Tepid growth rates in private consumption and exports, projected at 0.3% and 0.7%, respectively, are the main factors contributing to this year's downward revision of economic growth momentum from April's 3% forecast, said Ulrich Zachau, the World Bank's Bangkok-based country director for Southeast Asia.
Economic growth in the second half of this year is expected at 3% on an annual basis, supported by net exports and public investment together with a slow recovery in private consumption and private investment.
Besides seasonal factors, eroding export competitiveness in technological production and problematic labour competitiveness are considered long-term structural factors that have caused a slow recovery in Thai exports, Mr Zachau said.
"These structural factors are [expected] to stay for the long haul, and that's why we believe Thai exports will continue to grow, but more slowly than those of other countries until Thailand finds a way to address these structural factors," said Mr Zachau.
The economy contracted by 0.1% in the first half as political unrest took a toll on economic activity, while exports in the first eight months declined by 1.4% year-on-year to US$151 billion.
Mr Zachau welcomed the government's most recent stimulus measures, particularly the one-time subsidy payment for low-income rice farmers, expecting the package will add up to 1.4% to GDP growth over the two-year period of 2014-15, given that the disbursement rate is in line with government projections.
The World Bank estimates additional government spending will boost GDP growth by 0.8% this year and 1.5% next year.
The government last Wednesday approved a 324.5-billion-baht stimulus package, which covers expediting 129 billion baht in disbursement from the fiscal-2015 investment budget, using leftover funds from the Thai Khem Khaeng project for repair work under the Education and Public Health ministries as well as for irrigation projects, and a cash handout of up to 15,000 baht per rice-farming household.
Mr Zachau said the bank recommended Thailand develop four key areas to enhance its economic growth prosperity.
They are upgrading competitiveness of merchandise exports; improving rural education standards and human resource skills; addressing social inequality through tax reforms, particularly property tax; and reducing intensive energy consumption.
Regarding the move to implement an inheritance tax, the tax itself would contribute little to government coffers but could help to reduce social inequality, Mr Zachau said.
Risks to economic growth next year include global economic uncertainties, particularly in the euro zone, and domestic political uncertainty, he added.