BANGKOK: Thailand's economy may contract less than forecast this year due to a better-than expected third quarter, but could perform worse than expected next year as the key tourism sector remains sluggish, the central bank governor said on Friday.

Fiscal stimulus measures are still needed to support Southeast Asia's second-largest economy at least until there is a coronavirus vaccine available, Bank of Thailand Governor Sethaput Suthiwartnarueput told a group of reporters.

In September, the BOT forecast the tourism-reliant economy would shrink a record 7.8pc this year before growing 3.6pc in 2021.

It will give new forecasts at its policy meeting on Dec. 23

Gross domestic product (GDP) shrank a less than expected 6.4pc in the third quarter from a year earlier after slumping 12.1pc in the second quarter.

"This year's economy is better than expected... but next year it could be worse than thought," Sethaput said, adding the BOT's projection of nine million foreign tourists next year might not be met.

Every 1 million tourists lost would impact GDP by 0.5pc as the service sector accounts for nearly 70pc of GDP, so "the impact is quite big" and could not be offset by improved consumption and a recovery in exports, he said.

Fiscal stimulus measures should continue while monetary policy will remain accommodative to support growth with "reasonable policy tools on the table", he said. The BOT's policy rate is already at a record of 0.50pc.

But quantitative easing is not suitable for Thailand as liquidity and bond yields were not an issue, he said.

The speedy rise of the baht remained a concern as it will hurt the economic recovery and exporters, he said.

However, Deputy Prime Minister Supattanapong Punmeechaow told reporters earlier on Friday the economy was not being affected by the baht's strength, which had been driven by a weaker dollar.

The economy may contract only 6-7pc this year and grow 3.5-4.0pc next year, he said.