Information and communication technology (ICT) spending in Thailand will grow by only 3.8% this year, a steep decline from initial projections of 13%, because of weak GDP growth coinciding with slower government spending and poor domestic consumption.
The revision by global IT research firm IDC Thailand presents the root causes of the industry's poor performance.
"Spending on ICT in Thailand will rise by 3.8% to 677.8 billion baht in 2015, accounting for over 7% of the country's GDP," said Michael Araneta, country manager of IDC Thailand.
Local ICT spending is expected to gradually recovery next year with annual growth of 4.5% to 708 billion baht, thanks to the development of a digital economy and imminent fourth-generation (4G) spectrum auctions.
"Local ICT spending should grow in line with GDP growth, unlike previously when it surged by two to three times GDP growth," said Mr Araneta.
Satianporn Suvansupa, an analyst at IDC Thailand, said local consumer IT spending would contract 1.5% to 177 billion baht this year, down from 180 billion in 2014. Spending is slated to contract 1.3% to 175 billion in 2016.
IT spending from the consumer segment is expected to account for 65% of the total this year. Smartphone sales are the only key growth driver for consumer IT spending including mobile phones, personal computers and tablets.
Sales of smartphones are projected to grow by 29% to 20 million units this year. Smartphone penetration is expected to reach half the population in 2015.
Mr Satianporn said the value of the smartphone market would grow by 7% to 122 billion baht this year, then plunge to 0.5% growth in 2016, compared with double-digit growth the past few years.
A flood of Chinese smartphones has pushed down average handset prices from 8,000 to 6,000 baht this year, he said.
Mobile applications and content are other growth areas for consumer spending, with double-digit increases expected this year, surging forward from 29 billion baht in 2014.
Thailand's telecommunications service is projected to grow by 6% to 308 billion baht this year, down from an earlier forecast of 14%, as voice service revenue continues to contract by 6%. Local mobile data service is expected to gain 18% this year.
John Nguyen, another analyst at IDC, said private sector ICT spending would grow by 6% to 237 billion baht this year thanks to heavy purchases of emerging technologies like cloud computing. Spending from large enterprises, especially banks, telecoms and manufacturers, will account for 48% of private spending.
Jarit Sidhu, an IDC analyst, urged the government to accelerate the rollout of 4G infrastructure and fixed broadband networks. ICT regulations need to be updated to promote the industry.
"The development of a digital economy requires two to three years to have an impact," said Mr Jarit, adding that in Malaysia, the digital economy could contribute 16% to its GDP growth.