The Siam Commercial Bank's Economic Intelligence Center (EIC) has expressed concerns that household spending will run out of steam with the decline in commodity prices, posing a risk to economic growth.
Farm income, which recovered after the increase in agricultural product prices in the first quarter, could fall again because prices started to decline recently, said Phacharaphot Nuntramas, head of economic and financial market research at the EIC.
"Declines in household incomes resulting from poor recovery in the labour market will impact middle- to low-income earners, who already shoulder high debt," he said.
Given that private consumption accounts for half of GDP, Mr Phacharaphot said the slowdown in consumption could weigh on economic growth in the second half.
However, the government's mid-year budget for fiscal 2017 could help stimulate spending, mainly in provincial areas, Mr Pacharaphot said.
The EIC forecasts that private consumption will grow 3.1% this year.
SCB's research house, however, marginally raised its GDP growth forecast for this year to 3.4% from 3.3% predicted earlier, on the back of strong growth in exports.
The EIC also raised its merchandise exports forecast to 3.5% this year, up from 1.5% expected earlier, but still much lower than the Bank of Thailand's revised forecast of 5%.
"We have a rather conservative view on exports, as crude oil prices and prices of agricultural products are expected to remain low in the second half, pressuring the prices of Thai export goods," Mr Phacharaphot said.
He said Thai merchandise exports managed to grow at a fast clip during the five months to May, at 7.2%, due to increases in both quantity and price, while the sector is expected to grow just 1-2% in the second half, mainly supported by growth in quantity.
Mr Pacharaphot said Thai exports remain at risk from currency fluctuations in the period ahead as the baht appreciates at a faster pace than the currencies of other countries in the region such as China, Indonesia and Vietnam.
He said the EIC revised its baht forecast to 35-35.50 against the greenback at year-end, up from 36 projected earlier.
Mr Pacharaphot said private investment is expected to remain sluggish this year, partly because Thai companies tend to invest through mergers and acquisitions rather than in fixed assets such as construction and machinery.
"What we have seen is the percentage of cash flow used by listed companies for M&A deals has continued to increase in the past few years, more than the percentage of cash flow used in traditional investments," he said. "These investments are not included in GDP and can also indicate that the economy might not be strong enough to invest more, so companies would rather capture the existing market share of other firms."