BANGKOK: Thailand's economic recovery is expected to be sluggish with growth of 2.6% in 2021 after last year's slump, and it should continue accommodative policies to support the recovery, the International Monetary Fund (IMF) said.

The tourism-reliant economy contracted 6.1% last year, its deepest decline in over two decades, with tourism devastated by the impact of the coronavirus pandemic.

This year's growth will be driven by a recovery in domestic demand, the IMF said in a statement after a staff visit to Southeast Asia's second-largest economy.

"The outlook remains challenging," it said. "The recovery in tourism is expected to be slow for most of 2021, hinging partly on a successful vaccine deployment and resumption of global travel".

The mission recommended continuing accommodative policies to support the recovery, reduce long-term damage, and tackle long-standing challenges, while avoiding a premature withdrawal of policy support until the recovery was secured, the IMF said.

"The exchange rate should remain flexible as a shock absorber to volatile capital flows while using macroprudential policies to address possible financial stability risks," it said.

Thailand's central bank has left its benchmark rate at a record low of 0.50% since mid-2020 after three cuts earlier that year to support the economy.

It will next review policy on March 24, when most analysts expect no policy change.

It is expected to reduce its 2021 growth outlook from 3.2% at the review. Last month, the central bank governor said the economy could grow at the upper 2% levels this year.