Analysts project 2 more interest rate cuts
Accelerated public spending and resilient exports helped to prop up second-quarter GDP, which expanded above the consensus forecast to 2.8% year-on-year, while first-half GDP growth was 3%, said KGI Securities (Thailand).
However, economic momentum should fade significantly in the second half, said Rakpong Chaisuparakul, senior vice-president of the brokerage.
"Based on actual readings for the first six months and our 2025 GDP projection of 1.9%, we calculate GDP growth could slow significantly to 0.9% year-on-year in the second half given a higher base effect from government spending and a more visible effect from the US reciprocal tariff as the front-loaded effect dissipates," he said.
The Constitutional Court is scheduled to rule on Aug 29 on the audio clip case involving Prime Minister Paetongtarn Shinawatra and Cambodian leader Hun Sen. On Sept 9, the Supreme Court is set to rule on a case regarding the health conditions of ex-premier Thaksin Shinawatra.
Another important case being considered by the National Anti-Corruption Commission seeks to determine whether the current government improperly allocated the 2025 budget to fund the controversial digital wallet stimulus, according to KGI.
With a projected economic slowdown in the second half and the fluid political situation in the weeks ahead, Mr Rakpong said KGI economists maintain their forecast of a policy rate reduction to 1%, down 50 basis points (bps) by the end of the year.
Kuala Lumpur-based Maybank said despite encouraging signs in the first six months in terms of private investment, public investment and public consumption have started to taper as favourable base effects wear off.
Thai GDP growth is expected to slow to 1.7% in the second half "as headwinds gather", Maybank said in a research note jointly prepared by head of macro research Erica Tay.
"US tariff differentials with Asian competitors, as well as temporarily-adrift domestic politics, could slow the roll-out of investment commitments," said Maybank.
"Border tensions with Cambodia have affected provincial tourism, disrupted foreign labour supply, and hurt cross-border production networks spread across both nations."
Maybank maintained its Thai GDP growth forecast at 2.3% for 2025 and 2% next year.
"With an increasingly sluggish inflation outlook, we now expect the Bank of Thailand to ease once in the first quarter of next year by 25bps in addition to a 25bps cut in this year's fourth quarter, bringing the policy rate to 1% by year-end 2026," said the banking and investment conglomerate.
BofA Securities anticipates Thai headline inflation to remain subdued due to declining raw food prices, while energy prices continue a downward trend.
"The policy rate outlook should be guided primarily by economic and inflation trends, which we still expect to remain weak, signalling the need for further cuts," said emerging Asia economist Pipat Luengnaruemitchai.
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