Standard Chartered Bank forecasts the Thai economy will grow 3.6% this year, underpinned by strong export growth, while lower political uncertainty is expected to push GDP growth to 4.3% in 2018.
"After a decade of political crises pressuring the country's economic growth, we expect strong growth this year and next based on strong exports and reduced political risks," said Tim Leelahaphan, an economist for Thailand at Standard Chartered Bank.
He said stronger than expected growth of merchandise exports during the first eight months this year -- around 9% -- was expected to push economic growth to 3.6% this year.
Mr Tim said the bank expects exports to grow 7% this year and then slow down slightly to 5% in 2018 due to a higher base.
He painted a brighter outlook for economic growth of 4.3% in 2018 because of a number of supporting factors including a clearer political road map, strong infrastructure investment and continued recovery in exports.
Standard Chartered Bank's latest forecast for 2017 is a bit lower than the Bank of Thailand's forecast at 3.8% this year, but the projection for next year exceeds the 3.8% predicted by the central bank.
"The prime minister recently announced that the general election should take place in November next year, strengthening investors' confidence in the economy," said Mr Tim.
He said lower political risks and political continuity are also facilitating progress on infrastructure investment projects.
Since 2015, the government has disbursed only 50 billion baht or less than 5% of the total 1.79 trillion baht planned for mega-infrastructure projects.
"We expect disbursements to accelerate to more than 200 billion baht in 2018, driving economic growth even higher that year," said Mr Tim.
"Even if the government fails to fulfil its promise of general elections in November next year, we expect investment under the current plan to continue, which should bring economic growth to at least 4% in 2018."
He said external risks, including geopolitical tensions in the Korean Peninsula, trade protectionism and a slowdown in the Chinese economy may depress economic growth going forward.
Mr Tim also warned that Thailand's interest rate trend reversal is likely to come earlier than most expect, as he assumes the Bank of Thailand will start raising the policy rate in the middle of next year.
Standard Chartered Bank expects the central bank to raise its policy rate at least two or three times next year.
Continued economic recovery and risks regarding financial stability are supporting the central bank's decision to raise the rate, while inflation should start rising again next year.
He said the weaker base effect, strong economic growth, increasing crude oil prices and a higher cost of labour from recent regulations on migrant workers will support inflationary pressures next year.
