Bank of Thailand's December economic report stated that the economy grew at a moderate pace on the back of domestic demand, amid weakness in the rural economy.

The agriculture income remained subdued; however, it grew marginally as harvesting took place during December. Further poor weather conditions and low prices weigh on the growth in the agriculture sector.

Improved manufacturing activity and a gradual increase in the tourism sector benefited the domestic activity growth. Manufacturing activity is likely to support economy's growth as it is expected to rise 2.8% q/q sa in the fourth quarter of 2015. Tourism also grew moderately as it posted a gain of 3.2% m/m sa in December.

Private consumption rose 0.7% m/m sa in December, as local spending grew with dropping oil prices and strong demand for durables. Thailand's external position is likely to remain strong as December's current account surplus amounted to 4.9 billion USD, which increased the full year's surplus to 34.8 billion USD. However, the overall BoP surplus amounted to 5.9billion USD.

"Against the backdrop of a gradual improvement in growth and persistently low inflation, we expect the Bank of Thailand to keep monetary conditions accommodative", said Barclays in a research note. "We believe the BoT is likely to keep rates unchanged through 2016, with a bias for a weaker exchange rate, if the THB appreciates materially, we do not rule out the possibility of rate cuts aimed at weakening the baht"