The World Bank has raised its full-year economic growth forecast for Thailand to 3.1% while voicing concerns about the main economic engine, government spending.
A promising first half encouraged the Washington-based lender, like many research houses, to raise its 2016 forecast. Despite the upward revision, Thailand is still predicted to be a laggard in Southeast Asia, according to the World Bank's latest report on East Asia and the Pacific.
The strong tourism sector, government stimulus measures and rising private consumption underpinned economic growth in the first half, but shrinking exports and tepid private investment indicated that growth was not distributed to every sector, said Kiatipong Ariyapruchya, the bank's senior economist in Thailand.
"The Thai economy posted stronger-than-expected growth in the first half of the year, but a broad-based and self-sustaining recovery has yet to take hold," he said.
The World Bank earlier estimated Thailand's GDP growth at 2.5% this year.
"Our view for the future is the same as the Bank of Thailand's: that economic growth in the third and fourth quarters will not be as high as growth in the first two quarters," Mr Kiatipong said. "Right now, Thailand's economic growth is relying heavily on government expenditure, so the important question is how the government will stimulate every sector before the fiscal policy space runs out."
Government spending in the July-to-September quarter slowed down, he said, with a lower disbursement rate than in the previous quarter -- especially for infrastructure investment.
According to Mr Kiatipong, the main risks for the Thai economy are the financial instability of China and the possibility of political uncertainty at home that could delay public spending and weigh on consumer and investor confidence.
The World Bank's most recent survey of companies in Thailand found that the two main factors discouraging private investment were a shortage of skilled labour and a lack of confidence in state investment plans.
Mr Kiatipong said that while sentiment improved after the voters endorsed the new charter, the private sector still needs assurance that political chaos will not repeat itself and the general election will happen as planned.
In the meantime, Credit Suisse has upgraded its projection for Thai GDP growth to 3.2% in 2016 and 3.3% next year, compared with 2.9% and 3% respectively in the previous forecasts.
The financial house said in its latest economic report that the revision was based on resilient tourism after the August bombings and a better growth outlook in China and Europe to support Thai exports.
"We continue to expect some growth slowdown in the second half of this year but now think the drag from exports and tourism will be milder than initially thought," the report said.