The export-reliant country has been sharply hit by the Sino-U.S. trade conflict. Exports may fall 3.3% in 2019 before rising just 0.5% in 2020, according to the Bank of Thailand (BOT).
A strong Thai Baht, which has gained 8.3% against the dollar in 2019 and is Asia's top-performing currency, has added to the pressure on exports. Analysts say it could also hit tourism.
Thailand's growth has lagged peers for years, and the central bank, after several downgrades, predicts it will be just 2.5% this year, the weakest pace since 2014 when the army seized power in a coup, and forecasts it would be 2.8% in 2020.
Some analysts are even more pessimistic.
"We see growth of just 2.4% this year and 2.5% next year," said Somprawin Manprasert, chief economist of Bank of Ayudhya. "The economy is still in a slowdown," he said, adding that poor exports are now hurting domestic activity.
Charnon Boonnuch, an economist at Nomura in Singapore, said he only expected a sluggish economic recovery in 2020.
Graphic: Thailand's growth and peers, https://fingfx.thomsonreuters.com/gfx/mkt/13/315/315/Thai%20growth%20VS%20regional%20peers.png
Thailand is a regional production and export base for global carmakers, but car shipments fell 6% in the first 11 months of 2019, prompting some factories to cut work hours, said Surapong Paisitpattanapong, spokesman of the Federation of Thai Industries' auto division.
"A profit from making one car is no more than 5%, but our baht has gained 7%-8%. So the more they export, the more they suffer losses," he said.
In a bid to fight currency strength, the BOT imposed various steps and cut its key rate twice in 2019 to a record low of 1.25%, but the baht remains firm, driven by the large current account surplus.
The central bank has said that more measures are possible, adding that market intervention may be difficult as Thailand risks being added to a U.S. watchlist of currency manipulators.
Graphic: Thai baht and regional currencies , https://fingfx.thomsonreuters.com/gfx/mkt/13/387/387/Thai%20baht%20and%20regional%20currencies.png
The government has been trying to lift growth by infusing more funds, including a $10 billion stimulus package, but with little impact.
There was also a four-month delay in the 2020 budget to February due to a delay in cabinet formation, after an election in March voted former junta leader Prayuth Chan-ocha back to office as prime minister with a slim majority in parliament.
Political uncertainty is rising after thousands of people recently joined the biggest protest since Prayuth's 2014 coup, following a move by authorities to ban a party that has rallied opposition to the government.
In January, a court will rule on the dissolution of the Future Forward Party, which could again spark protests.
"The economy should be better next year, albeit not much, if there is no fresh political chaos," said Sanan Angubolkul, vice chairman of the Board of Trade of Thailand.
Visit Limluecha, vice chairman of the Thai National Shippers' Council, said there are no positive signs for the economy yet. "I see no light at the end of the tunnel."
By Orathai Sriring and Satawasin Staporncharnchai
