BANGKOK, Thailand – Krungsri Research has revised down its forecast for Thailand’s 2025 GDP growth to 2.1%, from the earlier estimate of 2.7%, citing mounting risks from both global and domestic factors. While the Thai economy expanded by 3.1% in Q1 2025 year-on-year—slightly above expectations—the underlying structure remains fragile.
One key concern is that export growth of 15% in the first quarter was driven in part by front-loading of shipments ahead of anticipated U.S. tariff hikes. This suggests that momentum from the external sector may not be sustainable. Meanwhile, private consumption is showing signs of weakening, and private investment continues to contract despite robust public spending—highlighting domestic demand limitations and structural challenges.
Triple Threat Behind GDP Revision
Pimnara Hirankasi, Head of Economic Research at Bank of Ayudhya (Krungsri), pointed to three main reasons for the downgrade:
- The economic impact of the March earthquake
- Weakened momentum in the tourism sector, particularly due to safety concerns among Chinese tourists
- Escalating risks from U.S. trade policy uncertainty, including potential tariff hikes under various U.S. legal provisions
These risks, she noted, are feeding into a negative feedback loop, weighing on both consumer and investor confidence.
Trade War Risks Cast Long Shadow
Although a U.S. trade court recently suspended reciprocal tariffs as of May 28, 2025, concerns persist that former President Trump may invoke other laws—such as Section 122 of the 1974 Trade Act—to impose tariffs of up to 15% on imports, including from Thailand.
Krungsri Research assumes a 10% tariff rate across major U.S. trading partners for its projections. Under this scenario, Thailand’s exports are forecast to grow by only 2.0% in 2025, following double-digit growth in Q1.
Private Consumption and Investment Slow
Private consumption growth is expected to ease to 2.6%, amid weakening consumer confidence, sluggish farm incomes, high household debt, and ongoing tourism recovery uncertainty—all of which could weigh on job creation and income growth.
Public investment is projected to rise by 5.8%, but Krungsri notes this is unlikely to trigger a “crowding-in” effect to revive private investment, which is forecast to shrink by -0.5%. Additionally, trade policy uncertainty continues to erode business confidence and delay investment decisions.
More Rate Cuts Possible
Given Thailand’s subdued inflation outlook and a weakening growth trajectory in the second half of 2025, Krungsri expects the Bank of Thailand may cut interest rates 1–2 more times this year to support the economy.
Four Major Risks on the Horizon
Looking ahead, Thailand’s economy faces four key challenges:
1.Uncertainty around U.S. import tariffs
2.Geopolitical tensions and fragile global security
3.Domestic policy uncertainty, exacerbated by limited fiscal space
4.Structural issues, such as declining competitiveness in manufacturing, high household debt, and rapid population aging
“While many countries are grappling with similar external risks, Thailand’s internal vulnerabilities make it particularly susceptible to shocks,” Pimnara warned. “This is a time for cautious policymaking and swift, effective response.”
