Thailand's economic growth is projected at 2.6% in the second half, below the first half, preventing full-year growth from exceeding 3%, warns Finance Minister Sommai Phasee.
"Growth of 3% will be a challenge for the government," he said.
The low growth is attributed to dismal exports, expected to shrink 1.3% in the second half and 1.7% for the entire year, said Mr Sommai.
Thailand faces a spate of negative factors, including the global economic slowdown, low crop prices, high household debt and tepid private investment.
Hopes for a rebound in the second half have been scaled back as some think tanks project full-year growth of 3% as a reach.
Last month the Bank of Thailand reduced its forecast for growth this year to 3% from 3.8%, while the Fiscal Policy Office is set to trim its 3.7% outlook later this month.
Mr Sommai said even with accelerated government disbursement of its investment budget, it could not overcome the weak exports, as government spending makes up 20-22% of GDP compared with exports comprising 70%.
Trade is contracting throughout the world, with India's shipments falling 15.9% for the first five months, Indonesia's down 11.8% and Singapore's contracting 7.2%.
However, the government will continue to expedite disbursal of its investment budget, particularly its 78-billion-baht economic stimulus second phase, of which 60-70% of the budget is expected to be drawn down next month.
He warned that accelerating budget disbursement too much could damage the disbursal system.
Supavud Saicheua, head of research and managing director at Phatra Securities, said his research house had slashed its 2015 GDP growth forecast to 2.5% from 3.3-3.5%. Despite improving government budget disbursement and tourism as well as an easing monetary policy, tepid exports, lower private investment and consumption, and the drought will be drags on the economy.
In fact, the revision does not take the drought into account, and it poses even greater downside risks to growth, weakening rural purchasing power.
Amid the fragile economy, Mr Supavud, who was a top candidate for central bank governor, predicted that the Monetary Policy Committee could cut the policy rate by another 25 basis points at its September meeting to a record low of 1.25%.
The rate-setting committee already slashed the benchmark rate by 50 basis points this year with a goal of warding off downside risks to growth.
He said state budget disbursement was revving up, with 10% of the 490-billion-baht investment budget taken out in the first quarter of fiscal 2015, 20% in the second quarter and 25% in the third quarter.
Sethaput Suthiwart-Narueput, a member of policy rate-setting panel, said private investment had the potential to grow, with large corporations with sound balance sheets leading the way.
But large companies need to be more confident before investing, and he urged the government to offer clearer guidelines or launch short-term measures for the next three to six months to stimulate private investment, such as tax cuts.
Kobsidthi Silpachai, first vice-president of the capital markets division at Kasikornbank, urged the central bank to use its balance sheet to depreciate the baht to support exports.
He said merely using interest rate policy might not be enough to resuscitate the country's GDP growth.
"The country's exports total 7 trillion baht per year while new loans are around 500 billion baht per annum. Stimulating exports will have a greater affect on GDP growth than any interest rate tools," said Mr Kobsidthi.