The Bank of Thailand says weak exports and domestic consumption resulted in a slower-than-expected economic rebound in the third quarter.
The central bank forecasts zero growth for exports this year, but third-quarter shipments still contracted by 2.7%, said Roong Mallikamas, senior director for macroeconomic and monetary policy.
Moreover, swelling household debt and sagging agricultural product prices have crippled domestic consumption, she said, adding that private consumption in the third quarter improved to 0.5% growth from flat growth in the second quarter, but such growth was lower than usual.
Mrs Roong said public spending helped to boost economic growth in the third quarter, but the magnitude was quite small due to slow budget disbursement, particularly for investment.
"The economy in the third quarter recovered at a slower pace than the central bank's forecast, but the momentum late this year and early next could be revved up. The Bank of Thailand is monitoring the situation," she said.
The slack economic momentum added to signs of downside risk to growth.
The Fiscal Policy Office on Thursday lowered its forecast for GDP growth this year to 1.4% from 2% projected in July.
The Finance Ministry's think tank is more pessimistic than the Bank of Thailand, which projects growth of 1.5% this year.
Mrs Roong said private investment in the third quarter fell by 1.7%, deteriorating from a 0.1% contraction in the previous three months due to weak demand, while export-oriented manufacturers had no need to expand production capacity as their use rate remained low at 61.1%.
However, tourism turned the corner to 4.1% growth in the third quarter from a 0.4% decline in the second quarter thanks to an increase in the number of Asian tourists.
Tourist arrivals rose to 5.85 million from 5.25 million in the previous quarter, while hotel occupancy increased to 51.6% from 47.3%.
The economy remained stable, with subdued inflation at 2% in the third quarter compared with the second quarter's 2.47% due largely to softer fuel prices.
The unemployment rate was relatively low at 0.8% of the workforce.
Thailand had a current account deficit of US$1.5 billion in the third quarter from a surplus of $500 million in the previous quarter thanks to higher imports, especially gold, consumer products and capital goods, plus profit repatriation of international companies.
In September alone, the statistics were better. Domestic consumption grew by 1% from August's 0.4% contraction, while private investment edged up 0.1% from a 1.3% fall in the previous month.