The World Bank has lowered Thailand’s economic growth in 2025 by 130 basis points, the lowest in South East Asia except for Myanmar that is forecast to contract 1%.
In the latest update from its 2025 outlook, the World Bank has slashed growth for 2025 in Thailand to 1.6%, a sharp decline from its economic forecast of 2.9% made in January this year. Meanwhile, GDP growth for 2026 is also cut to only 1.8%, down from 2.7% in early projection.
The World Bank wrote that in 2025, regional growth is projected to slow to 4.0 percent and will be influenced by global developments and national policy choices. Growth in the largest economy, China, is projected to slow to 4.0 percent, in the face of rising trade restrictions, elevated global economic policy uncertainty, slowing global growth and a weak property sector.
Growth in the rest of the region is likely to slow to 4.2 percent due to increased economic policy uncertainty, increased trade restrictions, and weaker external demand. Cambodia, Malaysia, Thailand and Vietnam are especially exposed to changes in external demand. Growth in the Pacific Island countries is projected to slow to 2.5 percent in 2025 due to lower external demand and as the post-COVID-19 rebound fades.
Private consumption has supported growth in all major economies in recent years, but its contribution has been declining in China, the Philippines and Thailand. Manufacturing exports have supported growth in Indonesia, Malaysia, and Thailand. Meanwhile, services exports have helped boost growth in Malaysia and Thailand, and to a lesser extent in the Philippines. Public investment has supported growth in China and Indonesia, while private investment has remained weak across much of the region, except in Malaysia and Vietnam.
Cambodia and Vietnam are especially exposed to changes in external demand from the US, followed by Thailand and Malaysia.
In the rest of the region, retail sales slowed following a strong recovery in 2022, except in Thailand, where stimulus measures boosted consumption in the latter half of 2024. Going forward, high levels of household debt, especially in Thailand, and increased economic policy uncertainty are likely to reduce consumption growth.
Measures to curtail the rising household debt in Thailand (above 90% of GDP) are leading to tighter credit conditions, which could further hurt private consumption growth.
In Thailand, the Digital Wallet program was launched and THB 140 billion were disbursed to lower income Social Welfare Card (SWC) holders in FY24. The government has earmarked a further THB 300 billion (about 1.7 percent of GDP) in FY2025 to be disbursed to other beneficiaries, completing the universal coverage of the Digital Wallet. The impact on aggregate consumption is likely to be limited given that better-off recipients tend to have a lower marginal propensity to consume.
In a separate report made by Macro Poverty Outlook, a unit of the World Bank, the researchers expected the economy to slow down from global trade policy shifts and heightened uncertainty on exports and investment, according to the report from World Bank.
Amid slower growth, the pace of poverty reduction is expected to decelerate, with the poverty rate declining to 7.1 percent in 2024. Amid high uncertainty, risks to the outlook are elevated.
Recent trade policy shifts and increased global uncertainty are projected to slow Thailand’s growth to 1.6 percent in 2025, due to weaker exports and private investment. Tourism may also soften amid a global slowdown. Private consumption will ease with declining earnings and deleveraging, though fiscal stimulus—especially the Digital Wallet and targeted business support—will cushion the impact. Private investment will slow amid uncertainty. Growth is expected to remain subdued at 1.8 percent in 2026.
Annual inflation is projected to increase to 0.8 percent but remain below the central bank’s target range in 2025. The general government deficit is projected to increase to 3.1 percent in FY25, mainly due to fiscal stimulus spending and an acceleration in public investment, leading to higher public debt. The current account balance is expected to increase to 3.4 percent of GDP in 2025, driven by services trade, while the goods trade balance is projected to decline.
Poverty is estimated to have declined to 7.1 percent in 2024, driven by stronger economic growth. The one-time cash transfer to 14.6 million state welfare cardholders, introduced under the first round of the Digital Wallet program, likely boosted consumption and contributed to an estimated 3-percentage-point reduction in headcount rates.
To enhance fiscal resilience, Thailand should reduce energy subsidies, implement tax reforms to raise revenue and promote equity, provide targeted transfers to support vulnerable households, and accelerate public investments in infrastructure, technology, and human capital.
Risks to the outlook are tilted to the downside, driven by the recent earthquake and heightened trade policy uncertainty. The earthquake may dampen growth through a potential slowdown in tourism, as uncertainty around the full extent of the damage persists. Uncertainty surrounding unfolding trade policy is also expected to weigh on investment and growth.
While it is difficult to gauge the full impact of recent measures, impacts are potentially significant given Thailand’s openness and integration into global value chains. With value added from exports accounting for 10 percent of GDP, Thailand’s economy is vulnerable to shifts in trade policy and global economic activity. A slowdown in the US, China, or EU could weaken demand for Thai exports and tourism, which will also affect business investments.
The rollout of the Digital Wallet scheme has been stalled in Thailand, following the Earthquake in late March that pivoted the government’s priority to focus on remedial measures. The Phase 3 of Digital Wallet will focus on Thai teenagers at the age of 16-20 totaling about 2.7 million. Last week, the International Monetary Fund (IMF) also revised Thailand’s economic growth forecast for 2025 to 1.8%, a significant decrease from its initial projection of 2.9% made in January. Among ASEAN countries, Thailand is the only nation for which the IMF has adjusted the GDP forecast to below 2%. Furthermore, the forecast for 2026 predicts a continued decline, with growth expected to decrease to 1.6%.