Economic growth is expected to come in at 1.2% this year on the back of a lacklustre first-half momentum, while the 2015 growth projection is an upbeat 4%, with public spending schemes drawing private investment, says Fitch Ratings.
A worker takes a break at a construction site in the Siam Square area of Bangkok. The economy is likely to show slower-than-expected growth this year. PATIPAT JANTHONG
The most recent forecast of 1.2% for 2014 was a downward revision from an earlier projection of 2.5% due to weaknesses in economic performance in the first two quarters, said James McCormack, London-based managing director and global head of sovereign and supranational ratings.
"When we saw weakness in the first and second quarters, we had to bring down the annual forecast based on the performance we'd seen," he said.
"We have not changed the numbers [for the second forecast], as we only heard about the stimulus measures this morning, and they're not something we have necessarily factored in."
The Thai economy contracted by 0.6% year-on-year in the first quarter as the domestic political unrest took a toll on economic growth momentum, but growth rebounded to a 0.4% rise in the second quarter, resulting in a 0.2% contraction for the first half.
The Bank of Thailand is keeping its 2014 economic growth projection at 1.5%, while the Finance Ministry's Fiscal Policy Office forecasts a rate of at least 1.6% but expects stimulus measures in the fourth quarter will drive it up to 2%.
Next year's buoyant 4% forecast is based on expected government-led investment infrastructure development schemes and incentives for attracting more private investment, Mr McCormack said.
"We are anticipating that we'll see progress in public spending programmes on infrastructure, and we're also expecting a recovery in business and consumer confidence, which could be a turnaround," he said.
Meanwhile, Fitch Ratings has maintained Thailand's sovereign credit rating at BBB+ with a stable outlook thanks to the country's strengths in terms of a sizeable net external credit position, low government debt level compared with rating peers and economic resilience to shocks, said Mr McCormack.
He said increased public spending was not projected to cause a deterioration in Thailand's public finances since the government's balance sheet remained quite strong and the country's public debt ratio was reasonably low.
"The stimulus that we're expecting in terms of government spending is not a rating negative. In fact, it would be supportive of growth, and it is something we've factored into our projection going forward," Mr McCormack said.
He said highly leveraged credit growth in the private sector was a red flag for Thailand's sovereign credit rating but not considered an immediate concern since the Thai banking sector had not shown financial stress.
Deteriorated governance indicators in recent years and low per capita income relative to rating peers are other weaknesses for Thailand's sovereign rating overview.
Global risks that could affect Thailand's economic growth are continued economic weakness in the euro zone and the Chinese slowdown, as these factors could dent Thai export growth and reduce tourism revenue, Mr McCormack added.