Kiatnakin Phatra Securities (KKPS) has written in its paper that the firm has revised down its growth forecast for Thailand in 2025, with an expected deceleration to 2.6%. Despite receiving positive contributions from delayed public investment and base effect in the second half of this year, weak domestic demand, and competitiveness challenges in the manufacturing sector slowed down the momentum. Unless substantial reforms are implemented, GDP growth could further dip to 2.4% in 2026.
Manufacturing Challenges: Thailand’s manufacturing industry is grappling with significant competitiveness issues, driven by technological shifts and heightened import competition. Key sectors such as automotive, electronics, and petrochemicals are particularly impacted, limiting overall economic recovery and hampering export potential.
Trade Uncertainty: Uncertain US trade policies, particularly under the Trump administration, pose substantial risks to Thailand’s exports. Potential tariff hikes could negatively affect crucial sectors like electrical machinery and agriculture, while increased competition from China may exacerbate trade imbalances.
Fiscal Stimulus and Strain: In response to subdued domestic demand, the Thai government has rolled out extensive fiscal stimulus programs, including cash disbursements. However, high household debt levels and cautious lending practices by banks may impede the efficacy of such measures. With public debt nearing 70% of the GDP ceiling, concerns regarding fiscal sustainability and the urgency for public sector reforms have arisen.
Anticipated Rate Cuts: Further interest rate cuts are deemed necessary to address the current economic conditions, marked by weak inflation, subdued demand, and tightening financial circumstances due to loan growth constraints, escalating non-performing loans (NPLs), and weakened household financial positions.
Political Uncertainty Impact: Ongoing political uncertainties in Thailand, exemplified by multiple legal cases against prominent figures, including the Prime Minister, could erode investor confidence and disrupt economic stability. Potential government instabilities leading to policy disruptions and decreased investment could further impede growth prospects, making political unpredictability a critical risk factor for Thailand’s economic trajectory.
