The Thai Retailers Association (TRA) has revised down its growth forecast for retail and wholesale business this year to 9% from 12% due to declining consumer purchasing power.
President Busaba Chirathivat cited government spending of 500-600 billion baht through economic stimulus schemes that have not spurred consumption as expected.
The retail and wholesale industry grew by 9% in the first half of this year, with the trend likely to continue in the second half.
"The retail business lost more than 120 billion baht in consumption value in the first half or 1-2% of the country's GDP," said Ms Busaba.
Growth in each retail category in the first six months was below last year's average growth.
Hypermarkets, convenience stores and department stores were the hardest-hit segments.
First-half sales grew by 7% for hypermarkets, 12% for convenience stores and 7.5% for department stores.
Full-year growth for the three segments is forecast to be the same, compared with 2012 growth of 10% for hypermarkets, 18% for convenience stores and 12% for department stores.
Busaba: Household debt a main factor
The Thailand Development Research Institute said public consumption continued to slow with a growth rate of 3.9% in the first quarter compared with a forecast of 6%. April showed a growth rate of 1.8%, while May brought a contraction of 0.2%.
The Kasikorn Research Centre has trimmed its economic growth forecast to between 3.8% and 4.3% from a range of 4.3% to 5.3% while highlighting the impact on consumer goods, cars, property and retail stores.
But TRA adviser Chatrchai Tuongratanaphan said retailers in all sectors continued to expand in the first half.
Ms Busaba said the Thai economy is expected to decline in the second half under the burden of rising household debt. Consumers will likely cut spending, especially for non-essential items.
To stimulate spending, stores will introduce more promotions in the third and fourth quarters.
Mr Chatrchai said consumption is an important factor driving the country's economic growth, and the government should pay more attention to the retail sector.
The TRA has called on the government to impose immediate measures to reduce the cost of living and keep food and fuel prices and transport fares unchanged.
Since the retail industry is a core element of the national economy, the TRA wants the state to support Thai retailers in expanding domestically and internationally. The Board of Investment could be a focal point for Thai investors dealing with foreign governments and provide one-stop services, said Mr Chatrchai.
The TRA also wants the import tax on luxury products lowered.