THAILAND could be set for a fragile economic recovery, as foreign tourism revenues remain missing and the economy continues to operate under its capacity, a Bank of America (BofA) Global Research report has suggested.

This comes as August indicators revealed that the Thai economy remained sluggish on both the internal and external fronts, BofA economists said.

The private consumption index fell at a faster rate in August, mainly dragged by consumption of services and non-durables as the positive support from extra holidays in the previous month faded out, said the report. While durable goods consumption improved and farm income rose thank to a a surge in agricultural prices, BofA economists said they believe the employment situation may not have bottomed out, which means domestic consumption recovery could remain “stagnant and vulnerable”.

The weakening consumption recovery may also reflect the end of fiscal cash handouts, which ended in July, BofA economists said.

Meanwhile, exports remained in contraction in August, falling by 8.2 per cent year on year, while imports contracted by 19.1 per cent year on year, resulting in a higher trade balance of US$5.4 billion, the report noted.

Although the pace of decline has slowed, private investment indicators in August continued to contract to -4.6 per cent year on year, BofA noted.

“In our view, the manufacturing sector is expected to operate below its full capacity throughout this year as global and domestic economic recovery remains fragile,” BofA economists said.

“Looking ahead, fading fiscal support, the loss of incomes during the high tourism season in Q4, and the end of loan forbearance programme would weigh on spending and business cash flows, which could pose additional risk to employment and debt serviceability,” BofA said.