Thailand slashes growth forecast amid impact of trade war
The latest forecast is a full percentage point lower than the previous estimate of 2.3 per cent to 3.3 per cent. PHOTO: AFP
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 (GDP) will likely grow 1.3 per cent to 2.3 per cent in 2025, taking into account additional stimulus measures the government is planning, the National Economic and Social Development Council (NESDC) said on May 19.
The latest forecast is a full percentage point lower than the previous estimate of 2.3 per cent to 3.3 per cent. The cut more or less aligns the agency's forecast with that of the Bank of Thailand, the World Bank and the International Monetary Fund.
If GDP growth comes in at the midpoint, it would be Thailand's weakest since the pandemic, according to Bloomberg-compiled data. It could take around two years for the economy to recover from the impact of a threatened 36 per cent US tariff and a global trade slowdown, NESDC chief Danucha Pichayanan said at a briefing in Bangkok.
'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 in a statement.
The benchmark SET Index fell as much as 0.8 per cent to its lowest level since April 30. The baht pared its gains to 0.2 per cent against the dollar.
South-east Asia's second-largest economy is bracing for a possibility of a 36 per cent tariff in the US, its largest export market. Thailand is waiting to start negotiations with Washington.
'The negotiation results will dictate the Thai economic outlook going forward,' Mr Danucha added. 'If the situation remains relaxed like this, our economy should continue to grow without problem. If not, the situation will change.'
Exports will likely grow just 1.8 per cent in 2025, down from the previous estimate of 3.5 per cent and the 5.8 per cent notched in 2024. Machinery and electronics are at risk of losing market share in the US from the higher tariffs, Mr Danucha said.
Private investment is projected to decline 0.7 per cent in 2025, in line with the export slowdown. Private consumption, which accounts for the bulk of Thai GDP, is seen expanding 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.
While Thailand's economy grew at a faster-than-expected pace last quarter, it was largely driven by a surge in exports as businesses front-loaded orders in a bid to avoid the Trump tariffs.
'The trade situation and foreign exchange may be more volatile and the economy may slow down going forward', with the impact more clear in the third quarter, Mr Danucha added. He warned businesses and consumers to brace for the risks and be cautious with their spending.
GDP in the January-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 with a revised 3.3 per cent pace logged in the previous three months.
The economy expanded 0.7 per cent quarter-on-quarter, compared with a median estimate for 0.5 per cent growth.
A global trade war would exacerbate Thailand's already sluggish recovery post-pandemic, with local consumption remaining tepid despite cash handouts, and China's slowdown hitting the tourism sector.
NESDC cut its forecast for tourist arrivals in 2025 to 37 million from 38 million.
The government will hold a meeting on May 19 to discuss ways to support the economy. However, limited monetary and fiscal space could constrain the nation's ability to respond.
Prime Minister Paetongtarn Shinawatra has pledged new stimulus measures, but they 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 in Apri l as the trade war weighs on its economic and fiscal strength.
The Bank of Thailand 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 in Ma y.
The central bank has warned that GDP growth in 2025 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 tariffs. BLOOMBERG
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