Thai Economy Faces Challenges Amid Global Uncertainty

Strategic Insights -

The Thai economy has shown signs of weakness in 2Q25, with growth supported by a surge in goods exports, a rebound in certain industrial productions, and continued robust growth in government spending. However, the economic outlook for 2025 appears uncertain, with a risk of expanding by only 1.6% due to declining tourism and ongoing uncertainty regarding US import tariffs. The Monetary Policy Committee (MPC) has cut the policy interest rate to 1.5%, but expects to reduce it further to 1.00% by 1Q26 due to the economy's persistent weakness and tight financial conditions.

Key Takeaways:

  • The Thai economy has shown growth in 2Q25, but the outlook for 2025 appears uncertain due to several negative factors, including declining tourism and uncertainty regarding US import tariffs.
  • The total number of tourist arrivals in 2025 is expected to decline to 33.6 million, with a potential impact on domestic services activity.
  • Ongoing uncertainty regarding US import tariffs on Thai products could intensify the impact on Thai exports and manufacturing in the second half of the year.
  • The Monetary Policy Committee (MPC) has cut the policy interest rate to 1.5%, but expects to reduce it further to 1.00% by 1Q26 due to the economy's persistent weakness and tight financial conditions.
  • Financial conditions remain tight due to credit contraction, particularly in loans to small and medium-sized enterprises (SMEs) and most consumer credit segments.
  • The Thai automotive market contracted in the first 6 months of 2025, with overall vehicle sales declining by 1.7%, commercial vehicle sales dropping by 1.8%, and passenger car sales declining by 1.5%.
  • The Stock Exchange of Thailand (SET) Index continued its downward trend throughout 2Q25, driven by domestic sluggish economic conditions, ongoing political uncertainty, and ineffective government measures, as well as external factors such as heightened concerns over US protectionist trade policies.
  • The average daily trading value on the SET and Market for Alternative Investment (mai) during 2Q25 declined by 4.7% compared to 1Q25, to Baht 40,800 million.

Statistics:

  • Total number of tourist arrivals in 2025: 33.6 million.
  • Thai economy's growth rate in 2Q25: weak but slightly expanding.
  • Monetary Policy Committee (MPC) cut policy interest rate to 1.5% in August 2025.
  • Expected reduction in policy interest rate to 1.00% by 1Q26.
  • Decline in overall vehicle sales in the first 6 months of 2025: 1.7%.
  • Decline in commercial vehicle sales in the first 6 months of 2025: 1.8%.
  • Decline in passenger car sales in the first 6 months of 2025: 1.5%.
  • Average daily trading value on the SET and Market for Alternative Investment (mai) during 2Q25: Baht 40,800 million.
  • Decline in average daily trading value on the SET and Market for Alternative Investment (mai) during 2Q25: 4.7% compared to 1Q25.

Sources:

  • Stock Exchange of Thailand (SET), company announcement, 2025.