Exports, a key driver of the Thai economy, are forecast to contract 0.8% this year, compared with a previous forecast for a 0.5% drop, Pornchai Thiraveja, head of the ministry's fiscal policy office, told a briefing.

The ministry predicts a small impact from a delayed budget for the fiscal 2024 starting in October, he said, as Thailand has yet to form a new government after the national election in May.

If the 3.35 trillion baht ($97.44 billion) budget is delayed by six months, it will affect GDP growth by 0.05 percentage point, and by 0.07 point if it's a nine-month delay, Pornchai said.

"The current budget will be used for the time being... the government has not stopped working," he said, adding that would help ease the impact on the economy.

Thailand's parliament postponed on Tuesday a vote for the next prime minister by the two houses of the legislature, as a political deadlock drags on more than two months after the election.

Southeast Asia's second-largest economy has been supported by increased domestic consumption and a recovery in the tourism sector, officials have said.

The economy expanded by a more-than-expected 2.7% in the first quarter from a year earlier. Last year's economic growth was 2.6%.

The ministry maintained a forecast of 29.5 million foreign tourist arrivals this year, but it slightly lowered its forecast for foreign tourist spending to 1.25 trillion baht from 1.3 trillion, the official said.

Pre-pandemic 2019 saw a record of nearly 40 million foreign tourists, who spent 1.91 trillion baht ($55.43 billion). Pre-pandemic, tourism accounted for about 12% of gross domestic product (GDP).

The ministry predicted average headline inflation at 1.7%this year, compared with 2.6% projected earlier, and against a 24-year high of 6.08% last year.

The baht is expected to average 34.01 baht per dollar this year versus 33.17 seen earlier, with the dollar supported by U.S. rate hikes, fiscal policy advisor Wuttipong Jittungsakul said.

($1 = 34.3800 baht)