There is ongoing debate regarding whether Thailand’s economy in the “Year of the Snake” will face greater challenges than it did in the previous “Year of the Dragon”. Looking back to 1990, Thailand experienced the highest GDP growth rate in the ASEAN region at 11%, with an average GDP growth rate of 8.7% from 1990 to 1995, compared to ASEAN’s overall growth of 5.6%. However, following the Asian financial crisis, Thailand’s economic growth began to decline and fell below that of several ASEAN countries. Over the past decade (2014 to 2023), Thailand’s GDP grew by only 1.8%, whereas ASEAN’s growth surpassed 3.7%.
In terms of monthly headline inflation rates, Thailand has successfully maintained control, with rates never exceeding 11% since the Asian financial crisis up to the present. In contrast, Indonesia and Vietnam experienced inflation rates exceeding 80% in 1998 and over 28% in 2010, respectively. The Bank of Thailand forecasts that the headline inflation for 2024 may grow by only 0.4%, but it is expected to align with the target range of 1.1% in 2025.
The low inflation rate, coupled with stringent lending practices and the further reduction in interest rates by the U.S. Federal Reserve in December 2024, suggests that the Bank of Thailand may consider lowering interest rates in the future, despite having already made one reduction in October 2024. As of the second quarter of 2024, Thailand’s seasonally-adjusted-household debt remains high at 89.8% of GDP, with over 28% classified as non-productive loan such as loan for other personal consumption. Data from National Credit Bureau also indicates that as of September 2024, total non-performing loans reached 1.2 trillion baht, reflecting a year-on-year increase of 14%. It is evident that adjustments in interest rate will significantly impact the direction of the Thai baht; a depreciation of the baht would benefit the export sector, as exporters would receive increased revenue from sales in international markets.
Dr. Narain Chutijirawong, Executive Director of Clients & Markets at Deloitte Thailand further noted that Switzerland is increasingly playing a significant role as a key export market for Thailand. According to data from the Trade Policy and Strategy Office, Ministry of Commerce, in the first ten months of 2024, Thailand exported over 3.6 billion USD to Switzerland, reflecting a 5% year-on-year increase. This tends to position Switzerland as Thailand’s second-largest trading partner in Europe. Additionally, ongoing discussions regarding trade and investment cooperation between Thailand and Switzerland are taking place within the framework of the Free Trade Agreement negotiations between Thailand and the European Free Trade Association (EFTA), which includes Switzerland.
Tasada Sangmanacharoen, Senior Consultant of Clients & Markets at Deloitte Thailand further stated that the “Trump 2.0” policy, which poses additional challenges to the global trade, will be a crucial factor for Thailand and the exporters to monitor, as it may result in higher import tariffs on Thai goods. In 2023, Thailand exported to the United States over 48 billion USD, accounting for approximately 17% of total export value, with this proportion rising to over 18% in the first ten months of 2024. Consequently, any increase in tariffs could significantly impact Thailand’s exports performance and overall economy.
Deloitte views that the Thai economy, amidst uncertainty, will continue to rely on private consumption and tourism as the primary drivers of GDP growth in 2025. For the tourism section, Thailand Development Research Institute also suggests that Thailand should develop new tourist attractions in alignment with the increasingly warm climate, as the country risks losing over 60 billion baht annually due to climate change. The promotion of creative tourism, such as the development of indoor performing arts, museums, and music venues, is recommended. Additionally, outdoor sites that can adjust visiting times to avoid peak heat should be equipped with appropriate lighting and transportation facilities.
In addition to economic perspectives, Deloitte summarizes key business challenges for 2025 as follows:
- Supply Chain Volatility: Geopolitical tensions, climate change, and resource shortages strain operations, requiring businesses to adopt resilient and adaptive practices, along with predictive technologies, to effectively mitigate these risks.
- Sustainability Pressures: Companies must balance profitability with environmental responsibility to meet consumer demands and adhering to regulatory mandates, under increasing stakeholder scrutiny.
- AI Integration and Workforce Reskilling: Deploying advanced AI systems while addressing bias, data privacy, and automation requires balancing human oversight with innovation. Rapid technological advancements necessitate significant workforce upskilling, creating talent gaps and retention challenges.
“The rise of agentic AI marks a pivotal trend in AI, enabling autonomous, goal-oriented decision-making beyond content creation. These systems optimize tasks, foster innovation, and enhance collaboration between humans and machines. Unlike generative AI, agentic AI focuses on executing complex activities to achieve specific goals using machine learning and automation.” Dr. Narain emphasized.
Applications of agentic AI span various sectors, including customer service, manufacturing, sales, and healthcare, offering workforce specialization, innovation, and trustworthiness. However, challenges such as team coordination, trust calibration, and goal setting persist. Success demands clear SMART goals, effective team roles, and balanced oversight, to unlock the transformative potential of agentic AI’s while addressing associated risks.
Read more on Thailand’s Economic Outlook:
https://www2.deloitte.com/th/en/pages/about-deloitte/articles/thailand-economic-outlook.html
