Thailand's economic growth is expected to expand by 4% this year following a continued recovery in consumption and investment, but the country's competitiveness and adaptation to digital changes remain challenges going forward, says Deputy Prime Minister Somkid Jatusripitak.
"I am confident GDP growth will reach 4% this year, which would be the first time in a decade Thailand's economic growth reaches this threshold," Mr Somkid said during his opening remarks at the 18th Money Expo 2018.
"We are in a transitional period [and] the government will do everything for a smooth transition. The economy is gradually picking up though [GDP growth] might not reach its peak because of several limitations, but a 4% growth outlook will help boost morale and drive Thailand forward."
Recovery has manifested through upticks in several economic indicators such as private consumption and investment, while the Stock Exchange of Thailand (SET) index still has a good growth outlook despite a recent correction, he said.
An easing local currency will be good for exports and farm products, said Mr Somkid, adding that he remains upbeat about 8% export growth this year.
Thailand posted its strongest growth in five years at 3.9% year-on-year in 2017, driven by robust exports and tourism. GDP growth logged in at 3.3% year-on-year in 2016.
The National Economic and Social Development Board is due to release the first quarter's economic growth results on May 21.
But a combination of weak income growth and low-income households' increased reliance on debt make household debt deleveraging difficult in the short run, said HSBC economist Jingyan Chen.
"A higher debt-servicing burden will likely continue to depress private consumption. While a nationwide minimum wage hike in April by 2-7% is welcome news, we suspect that a large share of this will go to paying off debt, thus limiting the impact on spending and the real economy," said Ms Chen.
Although Thailand's GDP growth is poised to hit 4% this year, there are several challenges for the country such as international acceptance, competitiveness, and adapting to the digital age in terms of banking, insurance, and the capital market, said Mr Somkid.
Digital transformation will eventually cause a change in consumer behaviour and spending patterns, whereby industrial production has to be adapted on a full-scale basis, he said.
"Technology will determine everything from now on," said Mr Somkid.
"If there is no change in the business model of industrial production, this will be difficult [for businesses]."
He said a fully cashless society is anticipated in the next 10 years and all relevant sectors have to adapt to this trend, while the government has been propelling the transformation.
Trading on the SET, meanwhile, remains volatile following uncertainty surrounding external factors that are dampening the investment sentiment, said SET president Kesara Manchusree.
The pressure of higher US bond yields, interest rate hikes, and geopolitical friction between the US and Iran are short-term factors affecting market sentiment, she said.
Fund outflows will continue in the short run because of the US economic recovery and the dollar's appreciation, but foreign holdings in the domestic stock market stand at around 35% and such outflows are not expected to be significant, said Mrs Kesara.