Kasikorn Research Center (K-Research) is increasingly concerned about Thailand's sovereign credit rating because of the large budget needed to fund the government's stimulus schemes.
The government will need an enormous budget to fund the schemes, in particular the 10,000-baht digital wallet handout, which is estimated to require 560 billion baht, said the research house.
K-Research is awaiting clearer details about the cash giveaway, in particular the source of funding, before considering the policy implications, said Burin Adulwattana, managing director and chief economist.
In addition, the government's announced priority policies focus on short-term stimulus measures, including reducing the cost of living, particularly transport and energy costs, and a debt suspension scheme for small-scale farmers and community enterprises, which requires a large budget, said the research centre.
K-Research is also waiting for clarity on the government's plan to fund these programmes.
"If the government can deliver economic growth under these stimulus schemes, concerns about fiscal budget, public debt and sovereign credit rating would ease," Mr Burin said.
Thailand is expected to maintain its rating for the short term. However, the baht's performance will mainly depend on the government's fiscal discipline and the country's economic growth, said the research unit.
Regarding the baht's outlook, K-Research expects the currency to weaken in the short term because of the widening interest rate differential between the Bank of Thailand and the Federal Reserve.
In the short term, the centre forecasts the baht to depreciate to 36.3-36.6 to the greenback.
K-Research slashed its Thai growth forecast for 2023 from 3.7% to 3%.
Despite increased confidence and clarity after the government's formation, the Thai economy is still grappling with the global economic slowdown, especially the sluggish growth of China, which has been hit by property woes.
Foreign arrivals to Thailand are projected to tally 27.6 million this year, a downgrade from an earlier projection of 28.5 million.
Merchandise exports are expected to contract 2.5% this year, deeper than the previous forecast of a 1% contraction, he said.
The stimulus schemes should help bolster the economy to a limited extent this year, with a more pronounced impact at the beginning of 2024, according to the research unit.
K-Research expects GDP growth to improve next year to around 4%, supported by the government's economic policies.
The 10,000-baht digital wallet scheme may add 0.4%-0.6% to growth next year, depending on how the policy is administered, said the research unit.
Mr Burin said the Bank of Thailand's Monetary Policy Committee is expected to maintain its policy rate at 2.25% at its meeting today because the economy is growing with no inflationary pressure.
The central bank is expected to wait for a clearer picture of the government's stimulus measures before acting, as they could lead to higher inflation rate, according to K-Research.
The research house anticipates headline inflation of 1.4% this year.