Consumer confidence rose for a 12th straight month in May and hit the highest level since March 2020, boosted by a gradually recovering economy and a resilient tourism sector.
Political campaigns during the general election also resulted in increased circulation of money, improving economic activities in various regions.
The University of the Thai Chamber of Commerce (UTCC) reported on Thursday the consumer confidence index rose to 55.07 in May, from 55 in April, 53.8 in March, 52.6 in February and 51.7 in January.
The index remains below 100 points as consumers see the economy as recovering slowly from the pandemic, with high inflation and rising interest rates, while there are concerns about the instability of US financial institutions, said Thanavath Phonvichai, president of the UTCC.
These factors have dented domestic purchasing power, the tourism sector, exports, business activities and future job opportunities, according to the index.
Consumers are concerned about an uncertain political situation in Thailand, especially the formation of a stable government and choice of a new prime minister.
The possibility of protests outside parliament is also weighing on confidence, Mr Thanavath said.
"Consumer confidence is gradually improving, but remains weak as people are still concerned about political instability and a high cost of living, leading to cautious spending," he said.
"Politics has a considerable influence on confidence and we may have to wait 3-4 months to assess whether it has revived."
If a government can be formed by August, Mr Thanavath said the economy would benefit and GDP growth would tally 3.6-4%.
However, if a government cannot be formed until September or October, growth may be only 3%.
The university is maintaining its growth forecast for this year at 3.6%, but may adjust the figure in July, he said.
Mr Thanavath said the Thai economy should strengthen in the second half this year as the tourism and service sectors recover.
In addition, the economic growth trend in Asia will contribute to global economic growth, creating positive effects for Thai exports, he said.
Consumers have concerns about political pledges to increase the daily minimum wage, as well as higher production costs and rising interest rates, according to the index.
"Regarding foreign investors, there is no sign of a lack of confidence or withdrawal of investments. This is a wait-and-see period as the government forms," Mr Thanavath said.
"When the new government's policies are announced, foreign investors can make more decisive decisions."
The university also released the TCC Confidence Index, which gauges the sentiment of the business sector and chamber members in every province. The index rose to 53.6 in May from 51.9 in April, driven mainly by a recovery in tourism.
"In the first half of this year, an estimated 12 million foreigners will arrive in Thailand, with 25-28 million forecast for the entire year," he said.
However, Mr Thanavath said most business operators remain concerned about household debt as well as the high prices of goods and energy, which may prevent a full recovery of consumer spending.
In addition, enterprises are wary about political stability as the formation of a new government is still pending, he said.
