Thailand is not at risk of deflation but the economy needs additional government measures to stimulate domestic consumption as geopolitics, China's slowdown and the baht's fluctuation pose challenges to economic growth this year, says Kasikorn Research Centre (K-Research).
K-Research managing director Burin Adulwattana said headline inflation, which declined for a fourth consecutive month in January, did not "reflect deflation risks but in fact the low purchasing power" of consumers.
"Low inflation is temporary as core inflation remains up slightly by 0.5%," he said.
"In fact, low inflation indicates that consumers have no purchasing power and the economy needs additional measures to prop up purchasing power."
Year to date, many economic indicators have been disappointing except tourism numbers despite a slow return of Chinese tourists.
Rebounding exports are expected to resume growth of 2% this year compared to a contraction of about 1% in 2023 as global trade is improving but still faces challenges in terms of conflict in the Red Sea and the potential effects of climate change, Mr Burin said.
"The swing of the baht is likely to persist, pressured by the Federal Reserve's interest rate policy and uncertainties regarding the Thai interest rate," he noted.
Asia Plus Securities (ASPS) shares a similar view, saying the government may have to launch more stimulus measures as China's deflation hurts exports and the economy.
China's January CPI fell further by 0.8% year-on-year to the lowest level since the 2009 subprime crisis, reflecting China's economic deceleration, so Thailand's exports and the economy may recover at a weaker rate than expected, ASPS said in a research note.
"Since exports may be pressured by China's weak economic growth, Thailand's economy needs to be driven by consumption. Therefore, the government has to push forward additional stimulus policies, especially the digital wallet," the brokerage added.
BMI, a unit of Fitch Group, forecasts that Thailand's external health will continue to improve in 2024 but still fall short of pre-pandemic levels.
"While there have been encouraging signs of improvement -- with the export volume expanding for three consecutive months after a year-long contraction, this may prove to be fleeting against a backdrop of tepid external demand," said the London-based research firm.
China's economic slowdown and Beijing's deliberate policy decision to prioritise domestic flights over international ones means it will take a considerable period before Chinese tourist numbers rebound to their usual levels, it added.