[BANGKOK] Thailand significantly lowered its forecast for economic growth this year as the global trade war undercuts private investment and exports, adding to already-weak consumption at home.
Gross domestic product will likely grow 1.3 to 2.3 per cent in 2025, a full percentage point lower than the previous estimate of 2.3 to 3.3 per cent, the National Economic and Social Development Council (NESDC) said on Monday (May 19). The cut more or less aligns the agency’s forecast with that of the Bank of Thailand and the World Bank-International Monetary Fund.
“Economic growth remains constrained by high household and corporate debt burdens and it is expected the growth to be softened in the second half of the year, following the global economic and trade slowdown and the impact of trade protection measures,” it said.
The baht held steady after the data release, maintaining its 0.4 per cent gain against the US dollar.
South-east Asia’s second-largest economy is bracing for the possibility of a 36 per cent tariff in the US, its largest export market. Thailand is waiting to start negotiations with Washington to bring down the levies.
Exports will likely grow just 1.8 per cent this year, down from the previous estimate of 3.5 per cent and the 5.8 per cent in notched 2024. Machinery and electronics are Thai exports at risk of losing market share in the US market from the higher tariffs, NESDC chief Danucha Pichayanan said at a briefing in Bangkok.
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Private investment is projected to decline 0.7 per cent in 2025, in line with the exports slowdown. Private consumption, which accounts for the bulk of Thai GDP, is seen growing just 2.4 per cent, down from the previous estimate of 3.3 per cent and 4.4 per cent in 2024. Government stimulus should boost public consumption and investment, NESDC said.
Thailand’s economy grew at a faster-than-expected pace last quarter, driven by a surge in exports as businesses front-loaded orders in a bid to avoid the Trump tariffs.
GDP in the January to March period rose 3.1 per cent from a year earlier, beating the 2.9 per cent median estimate in a Bloomberg News survey and comparing to the revised 3.3 per cent pace notched in the previous three months. The economy expanded 0.7 per cent quarter-on-quarter, compared with a median estimate of 0.5 per cent growth.
A global trade war would exacerbate Thailand’s already sluggish economic recovery post-pandemic, with local consumption remaining tepid despite cash handouts, and China’s slowdown hitting the tourism sector. Limited monetary and fiscal space could constrain its ability to respond.
Prime Minister Paetongtarn Shinawatra pledged new stimulus measures to counter the impact of US tariffs, but it may come at the cost of bloating still-elevated government debt levels. Moody’s Ratings lowered Thailand’s credit rating outlook to negative from stable last month as the trade war weighs on its economic and fiscal strength.
The Bank of Thailand also has “very limited ammunition” after 75-basis points in cuts brought its benchmark key interest rate to 1.75 per cent, governor Sethaput Suthiwartnarueput said earlier this month.
The central bank has warned that GDP growth this year could fall to as low as 1.3 per cent – the slowest pace since the pandemic – in case of a severe trade war and higher US levies. BLOOMBERG