Kiatnakin Phatra Securities (KKPS) expectis a softening economic outlook for Thailand, highlighting the impact of trade uncertainty with a potential drag from the U.S. reciprocal tariff.
Thailand’s economic growth is facing increasing challenges, marred by weak domestic demand and a downturn in tourism. Adding to the strain, the United States announced a 36% reciprocal tariff on April 2nd, which, though currently suspended for 90 days, introduces significant uncertainty. Consequently, the 2025 GDP forecast has been lowered from 2.3% to 1.7%, reflecting both direct and ripple effects on the economy.
The immediate concern arises from diminished exports to the U.S. due to the higher tariff. While Thailand’s electronics exports to the U.S. have largely been spared by temporary exemptions, broader impacts include stalled investments, a slowdown in global demand, and increased caution within the private sector.
KKPS adds that the ultimate effect on the economy will hinge on the negotiations to mitigate the reciprocal tariff. Thailand is considering increasing its purchase of U.S. goods as a negotiation tactic. However, political sensitivities—especially in sectors such as pork and dairy—might constrain potential concessions. Additionally, stipulations on preventing Chinese transshipment could pose complex challenges.
Thailand’s economy is particularly vulnerable to global trends, notably in trade and tourism. KKPS cites that historically, a 1% decline in global GDP has reduced Thailand’s growth by approximately 0.6%.
In anticipation of economic headwinds, KKPS forecast three rate cuts by the Thai central bank over the next 12 months, reducing the benchmark rate to 1.25%, starting with the April 30th Monetary Policy Committee meeting. The government is considering reallocation towards infrastructure spending; however, limited fiscal flexibility complicates these plans. An increase in the public debt ceiling might become necessary within the next two years to facilitate these approaches.
