Despite two anticipated interest rate cuts this year, analysts are downgrading Thailand's economic growth outlook, citing lower tourism revenue and increasing uncertainty surrounding the digital wallet policy.
BofA Securities, a unit of Bank of America, cut its Thai GDP forecast this year from 3.7% to 2.6% as it no longer assumes the 500-billion-baht digital handout policy will be launched.
The Digital Wallet Policy Committee recently reconvened without a clear path. Amid pushback and objections, the committee concluded more subcommittees should look into potential corruption issues and receive more feedback and opinions.
While Prime Minister Srettha Thavisin insisted the government would continue to try and implement the stimulus policy, it "remains unclear whether the government has full support from its coalition and government officials", said BofA analyst Pipat Luengnaruemitcha.
"We think the government's reluctance to push the policy forward signals an increasing chance it may not pass as intended," Mr Pipat noted in a recent report.
According to BofA, a possible option is postponing the project to include it in the fiscal 2025 budget without a borrowing bill, starting in the new fiscal year beginning in October. Given budget constraints, the size of the scheme may need to be scaled down by at least half, he said, while another option is scrapping the plan.
The budget bill is not expected to be passed until April and disbursements may not start until May.
"We expect regular disbursements to provide some uptick to public investment expenditure and the construction sector in the second half," said Mr Pipat. "However, due to capacity constraints, some of the delayed budget may not be executed within the current budget year, which ends in September."
Chinese tourists remain the key risk to its forecast of 35.1 million arrivals this year and 38.8 million in 2025. Changes in spending behaviour still weigh on tourism revenue compared with pre-Covid trend, noted the brokerage.
"While we expect the number of tourists from other countries to recover to pre-Covid levels this year, we project Chinese arrivals to recover to 60% of the 2019 level, tallying 6.5 million," he said.
BofA reiterated its call for two 25-basis-point rate cuts, with one in June, then another in 2025.
"A weaker growth outlook would suggest even deeper cuts. A sustained tight monetary policy stance would be too restrictive, adding pressure to meagre domestic demand," said Mr Pipat.
Nuttaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said the think tank expects interest rates could be cut once or twice this year, starting in June.
Earlier this week K-Research trimmed its GDP growth projection for 2024 from 3.1% to 2.6%, citing the anticipated slowdown in private consumption.
"The weak economic data makes us believe the Bank of Thailand has room for one or two interest rate cuts this year. The first cut is likely to happen in June, and another in the second half," she said.