Thailand's economic recovery is expected to advance at a moderate pace in the near and medium term and it has policy space and ample buffers to minimise the risk of a low-inflation, low-growth trap, the International Monetary Fund (IMF) said on Tuesday.
Public investment would remain a key growth driver in line with the government's infrastructure plans, the IMF said in a statement after a staff visit to Southeast Asia's second-largest economy.
The outlook is subject to significant uncertainty and downside risks from factors including a bumpy rebalancing in China and a shift in US policy, it said.
"While cyclical conditions are improving, Thailand is afflicted by features of the 'new mediocre' facing some advanced economies," it said.
"Structural bottlenecks are holding back employment and investment, reinforcing weak expectations of domestic demand."
Thailand should use a policy mix of fiscal and monetary stimulus, coupled with structural reforms, the IMF said.
"The team recommends monetary policy easing together with enhanced communication to improve the balance of risks and steer inflation back to the target," it said.
"Monetary easing, as part of a broader expansionary policy mix, would counteract risks of low inflation becoming entrenched and prevent a further rise in real interest rates and the real debt burden," it added.
The Bank of Thailand (BOT) has left its policy rate unchanged at 1.50 percent, near a record low, since April 2015. It next reviews monetary policy on March 29, and economists expect no policy change for now.
The BOT has forecast economic growth of 3.2 percent this year, the same as in 2016. It reviews that later this month. The IMF's Executive Board is tentatively scheduled to discuss the staff report in May, the IMF said.
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