World Bank sees more monetary easing in Thailand as risks mount
Falling inflationary pressures may also open up room for further easing, although it underscores persistent demand-side weaknesses and the need for structural reforms to raise productivity and investment, the Washington-based lender said in a report on Thursday (Jul 3).
The Bank of Thailand has slashed its key interest rate by a cumulative 75 basis points since October to 1.75 per cent to cushion the blow to the economy from the fallout of global trade tensions and an uncertain growth outlook. It has also left the door open for further easing.
'With rising domestic and external uncertainty, as well as falling inflationary pressure, the monetary stance is projected to become more accommodative in 2025,' the World Bank said. 'However, a faster than-expected monetary easing to counter external headwinds could delay household debt reduction and pose risks to financial stability.'
Thailand was plunged into a political crisis this week with a court suspending Paetongtarn until it ruled on allegations of ethical misconduct against her. The political turmoil has sparked fears of a government collapse, a budget delay and the government's ability to negotiate down the threat of a 36 per cent US tariff on exports, which could jeopardise the country's already fragile economic situation.
The World Bank has slashed Thailand's growth estimates to 1.8 per cent in 2025 and 1.7 per cent in 2026 from 2.5 per cent in 2024. The downgrades reflect recent global trade policy shifts, weakening exports, slowing consumption and moderating tourism recovery, it said.
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The escalation of trade tensions and slower-than-expected recovery in tourism can dampen exports and services growth, the bank said. The political uncertainty could result in delays of next year's fiscal budget and public infrastructure investments implementation with spillovers into private investment and overall growth, it said.
Still, growth can hit 2.2 per cent this year if trade tensions cool and private investment grows moderately. Domestically, effective implementation of fiscal stimulus and high-quality infrastructure investment could support growth, according to the report.
The World Bank said digital technology can be a catalyst for Thailand's growth and create more jobs, deliver better services and boost productivity in the face of uncertainty.
The nation's digital economy is estimated to contribute around 6 per cent of gross domestic product and is the second-largest in South-east Asia. Financial services, digital payments, fintech, and software and engineering industries, have seen some of the fastest rates of job creation over the past decade, according to the World Bank.
'By leveraging digital technologies and fostering an environment conducive to innovation and growth, Thailand can raise its growth trajectory and accelerate towards high-income status, ensuring higher value-added jobs and social equity for its citizens,' the bank said. BLOOMBERG
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