Soft purchasing power caused by lower household income in both the farm and non-farm sectors has hindered a broad-based economic recovery, says a senior official at the Bank of Thailand.
Purchasing power, particularly for people in the low-income segment, was still weak in February as household income fell from a year earlier, said Don Nakornthab, senior director for macroeconomic and monetary policy.
Even though the supply of agricultural products increased in February, crop prices, especially oil palm and rubber, declined by 40-50% on the same period a year ago, he said.
Farm income has contracted since the second half of last year, and non-farm income, excluding mid-income earners and salaried workforce, also plunged.
"The economic rebound remained uneven and domestic consumption was still weak," Mr Don said. "We need to continuously monitor the situation. The Monetary Policy Committee's recent statement also said that it is a structural problem. However, private consumption is expected to improve and is expected to reach 3.3% this year."
Private consumption in February rose by 2.5% year-on-year, a slower pace than January's 5.5%.
The rate-setting committee earlier this week raised its economic growth outlook to 4.1% in 2018 from 3.9% predicted in December, but it left the policy rate unchanged at 1.5% to accommodate economic growth.
Mr Don was quick to calm jitters, saying farm prices would improve in the second half and help farm income move back into positive territory this year.
Moreover, the government's welfare and subsidy scheme for poverty and measures to aid low-income segments will be a boon to purchasing power and domestic consumption in the future, he said.
The economy continued to expand in February, propelled largely by strong exports and tourism.
On the domestic front, robust growth was observed in all components, namely private consumption, private investment and public spending.
Continued expansion in both external and domestic demand contributed to the growth of manufacturing output.
For the remainder of the year, internal drivers are expected to play a greater role while external drivers will be less impactful, Mr Don said, adding that state and private consumption will improve an the kick-start of state investment will prompt private investment.
"We're quite confident that the country's economy will come in at 4.1% growth as forecast or 4% on average each quarter, though global trade remains uncertain and could take a toll on exports," he said.