Private consumption growth could slow down in the second half if the government does not unveil fresh stimulus measures, warns a senior Bank of Thailand official.
"We [the Bank of Thailand] expect the growth in private consumption to slow down if the government doesn't issue any additional stimulus measures to support it. Nonetheless, private consumption will continue to recover," said Jaturong Jantarangs, an assistant governor for the monetary policy group and the Monetary Policy Committee (MPC) secretary.
Mr Jaturong said that private consumption expanded strongly in the second quarter, partly driven by temporary factors and government stimulus measures.
In its latest meeting, the MPC raised its GDP growth forecast for this year from 3.1% to 3.2%, mainly from the higher-than-expected growth in private consumption in the second quarter.
The central bank also revised its growth forecast for private consumption to 2.7% this year, up from a previous outlook of 1.8%.
Mr Jaturong said that the durable index of private consumption, after accelerating in the second quarter, had lost steam in the last two months, signaling that the acceleration in the second quarter might not be sustainable.
Finance Minister Apisak Tantivorawong recently said that the government is poised to launch a fresh round of stimulus measures, specifically targeting agriculture, in an effort to ward off downside risks to economic growth as the recovery sputters along.
Mr Jaturong said the Consumer Confidence Index of both the agricultural and non-agricultural sectors had shown no signs of changing from a downward direction in the near future.
He said there are supporting factors for the remaining period of this year. They are the government's ongoing economic stimulus measures and hiring in the agricultural and service sectors, both of which increase the population's income.
Risks to private consumption, however, continue to persist from the slow recovery in income for export manufacturers, he said.
Mr Jaturong also warned that a potential uptick in non-performing loans (NPLs) still looms.
"The number of NPLs showed signs of increasing, but not at a rapid pace. We see an upward direction for NPLs, especially from SMEs, as well as consumption-related loans such as personal and credit card loans," he said.
But Mr Jaturong said that public investment is likely to be better than expected after the yes vote in the charter referendum.
"After the constitution was accepted, people became more confident that the government investment projects would continue," he said. "But some in the private sector still prefer to sit on the sidelines and wait for [political] certainty after the upcoming general election."