The Thai economy recovered in 2015 after a slowdown induced by political uncertainty and is expected to strengthen moderately again this year and next, according to the latest report by the International Monetary Fund (IMF).
The report projects real GDP growth of 3% in 2016 and 3.2% in 2017. Its release follows a visit to Thailand by an IMF team from March 3 to 18.
The team found that the Thai economy grew 2.8% last year while headline inflation dropped to -0.9%, mostly due to a fall in energy prices.
The current account surplus rose to 8.8% of gross domestic product, thanks to a sizable improvement in the terms of trade, soaring tourism and import compression. Thailand's financial markets weathered relatively well repeated episodes of global financial volatility, according to the report.
The IMF team expected economic recovery to strengthen moderately, by 3% this year and 3.2% in 2017.
"A slight improvement in confidence and low energy prices foreshadow a pickup in private consumption. Public investment would remain a key driver, rising over the next few years and crowding in private investment. Headline inflation is projected to turn positive in 2016," the report read.
Regarding external risks, the IMF team referred to a possibly faster slowdown of the Chinese economy and capital outflows likely accelerated by global financial volatility. For domestic risks, it mentioned the possibilities of slow execution of megaprojects and prolonged negative inflation, as well as the huge household debts which may affect consumption and financial institutions.
"Against the lacklustre outlook and downside risks, Thailand's strong fundamentals provide room for manoeuvre to lift economic prospects in both the near and the long run," the IMF team reported.
It recommended the government deploy an expansionary macroeconomic policy, safeguard financial stability, enhance potential growth and gradually increase the value-added tax rate to 10% when the economic recovery is on sound footing.