Bangkok: CIMB Thai Bank’s research office has adjusted its projection for Thailand’s GDP growth in 2025 to 1.8%. The revision comes amidst concerns over potential additional US tax measures that could further lower the GDP growth to 1.4%. The economic landscape suggests a potential technical recession in the latter half of the year, with the policy interest rate anticipated to drop from 1.25% to 1.00%.
According to Thai News Agency, Mr. Amorntep Chawala, Assistant Managing Director and Head of Research at CIMB Thai Bank, highlighted the implications of US President Donald Trump’s decision to delay retaliatory tariffs on several countries, including Thailand, which faces a 10% tariff. Despite the delay, there is an increased risk stemming from US trade policies and ongoing tensions, prompting the bank to reduce its GDP forecast from the previous 2.7%.
The tariffs introduced by the Trump administration are expected to slow global trade. Thai exports may only grow by 1.4%, with a decline in the production and import of raw materials and machinery. Investment activities are also slowing, impacting labor and non-agricultural incomes. The steel, aluminum, automotive, and pharmaceutical sectors are particularly vulnerable. The Bank of Thailand (BOT) might consider easing monetary policy further if necessary, though significant rate cuts are unlikely due to existing constraints. The policy interest rate could fall to 1.00% if economic conditions worsen, and in such a scenario, specific measures to support SMEs and inject liquidity might be prioritized.
Fiscal measures are expected to play a larger role in economic stimulation, amid concerns about weak credit and potential liquidity traps. The baht is projected to weaken mid-year due to a strong dollar and capital outflows but may stabilize towards the end of the year. Despite volatility, Thailand’s robust tourism sector could position the baht as a regional ‘safe haven’ asset. The tourism industry is projected to see a marginal increase, with tourist numbers rising to 37.1 million from 35.5 million the previous year.
On April 2, 2025, President Trump announced ‘reciprocal tariffs’ against certain countries, labeling it as the ‘Liberation Day’ for the United States. This move is part of a broader strategy to reduce dependence on China and other nations, aiming to use tax revenues to lower public debt and domestic taxes. Solutions to the trade tensions include lowering import tariffs and non-tariff barriers, halting currency manipulation, and boosting US imports and investments.
The US economic outlook presents two potential scenarios: slow growth with GDP decreasing to 1.4% and inflation rising to 3.7%, or a mild recession with a GDP contraction of -0.2% and inflation at 5%. The latter scenario, with a 20% probability, could see the Fed maintaining or raising interest rates, affecting global trade and GDP in the long run.
To navigate these uncertainties, Mr. Amorntep advises a focus on defensive investments, maintaining capital, wise consumption, and cost management for SMEs and large businesses. The impact on Thailand will be significant in exports, investments, and tourism, necessitating prudent liquidity management and risk reduction.