Kiatnakin Phatra Securities (KKPS) revised down its 2025 Thailand’s economic forecast, with growth expectations adjusted from 2.6% to 2.3%. This revision stems from a sluggish and uncertain recovery in tourism, tepid consumer spending, and ongoing uncertainties surrounding trade policies.
Additionally, the manufacturing sector’s stagnation and financial deleveraging continue to be the primary obstacles to growth, while demographic trends also threaten to impede the country’s long-term growth potential.
Optimism surrounding an influx of Chinese tourists has been tempered by the slow pace of recovery. Outbound Chinese travel remains below pre-pandemic levels, with tourists favoring domestic trips or choosing destinations like Japan and Malaysia over Thailand. Moreover, the decline in popularity of package tours has further dragged spending, resulting in a revised forecast for 2025 tourist arrivals, now lowered from 38.1 million to 37.2 million.
The analyst stated that initiatives, such as cash handouts, have shown limited efficacy in stimulating economic activity and consumer spending. Upcoming stimulus measures, including a “use-it-or-lose-it” digital wallet, are not expected to make a substantial impact on GDP growth. Consumption of durable goods, particularly in the automotive and real estate sectors, also remains constrained due to tight lending conditions.
Given these challenges, KKPS projected an additional interest rate cut in the first quarter of 2026, following an anticipated total of three cuts in 2025. This would bring the terminal rate to 1.25% by 2026. However, downside risks persist, largely due to trade policy uncertainties.
Meanwhile, although household debt concerns have eased and financial deleveraging is evident, there may be room for further monetary policy easing for the Bank of Thailand (BOT).
Mentioning risks from trade uncertainties, Thailand also faces increased risk from potential U.S. tariff impositions, considering its significant trade surplus and existing tariff gaps with the U.S., as well as non-tariff barriers.
KKPS foresees that a 10% tariff on Thai exports could reduce the country’s GDP by 0.2 to 0.3 percentage points annually, posing additional risks to the economy. Furthermore, persistent U.S.-China tensions also pose more risks to Thailand’s export-dependent economy.
With challenges such as manufacturing stagnation, a declining tourism sector, and weak domestic demand, Thailand’s economic outlook remains concerning. While monetary policy easing could offer some relief, the situation underscores an urgent need for structural reforms to boost productivity and attract investments, otherwise, the nation could risk being trapped in a low-growth scenario.
