Thai central bank chief says uncertainty very high and limited policy space ahead over US tariffs impact

The Star

11-05-2025

BANGKOK (Reuters): Thailand has limited fiscal and monetary policy room ahead of what could be a prolonged impact from steep US tariffs, but the economy is not in crisis despite facing a very high degree of uncertainty, its central bank chief has announced.
Thailand is among the South-East Asian nations hardest hit by US President Donald Trump's trade measures and is facing a 36% tariff if a reduction cannot be negotiated before a global moratorium expires in July.
Bank of Thailand Governor Sethaput Suthiwartnarueput said monetary policy was not fixed and the central bank was ready to adjust rates if the outlook changes, but room for that was limited.
The BOT in April delivered a second consecutive cut to interest rates to 1.75%, the lowest level in two years, to support a lacklustre economy under pressure from U.S. tariffs.
The finance ministry last week cut its forecast for growth in the exports- and tourism-reliant economy this year to 2.1% from 3% due to the impact of U.S. tariffs and a global slowdown.
"The storm is coming. The real impact has not yet seen but will be felt in the fourth quarter," Sethaput told a press conference. "The impact will last long and will not end quickly."
The economy is expected to hit the lowest point after the fourth quarter and "recovery will take a long time to return to normal", he said.
FLOOD OF IMPORTS
The United States was Thailand's largest export market last year, accounting for 18.3% of total shipments, or $54.96 billion. Washington has put its trade deficit with Thailand at $45.6 billion.
The tariffs would immediately hit the manufacturing sector hard, but not as bad as during the pandemic, Sethaput said.
Support measures would need to be targeted and Thailand's protracted talks on free trade agreements should be expedited, he added.
A major concern for Thailand, he said, was a "flood" of imports from diverted trade that could impact a wider range of sectors such as textiles.
The government is seeking to speed up the rollout of the rest of its vaunted $14 billion stimulus programme to support the economy, but Sethaput warned such a move could backfire.
"With more imports, if we boost consumption, wouldn't that just help other countries?" he said.
The recent movements of the baht were in line with market forces and the central bank would manage volatility, he said. Sethaput's term ends in September and he cannot seek another having reached retirement age. A selection committee will shortlist candidates to replace him by July 2.
Sethaput on Friday said he hopes his successor to focus on long-term restructuring of the economy.
(Reporting by Orathai Sriring, Kitiphong Thaichareon and Chayut Setboonsarng; Editing by Martin Petty) - Reuters