Thailand’s economy started the year with optimistic growth forecasts, but the story quickly turned gray.
Almost halfway through the year, Thailand looks to be facing an economic shock that’s more complex than anything it has dealt with in the last two decades.
The warning signs are not hard to spot. Growth outlooks are being cut in half, credit ratings are being downgraded, and monetary policy is easing rapidly.
The truth is that Thailand’s economy has been fragile for years, and recent events have exposed that fragility.
Strengths are turning into weaknesses, and risks are multiplying.
Growth is fading, and no one’s surprised
For years, Thailand delivered respectable growth, often outpacing peers in Southeast Asia. But the numbers have been slipping recently.
GDP grew just 1.9% in 2023. The country entered 2025 hoping for a stronger recovery, with the Bank of Thailand forecasting 2.9% growth for 2025.
World Bank forecasts started the year with an optimistic 2.6%. But that optimism is quickly gone.
Just two months later, the World Bank slashed that figure to just 1.6% in its latest forecast.
That’s the lowest in ASEAN aside from Singapore and Myanmar.
Exports have kept the economy afloat in recent years, rising by 5.4% in 2024 and by 13.6% in January 2025 alone.
But this hasn’t translated into industrial recovery.
Manufacturing hasn’t kept up. Car sales are down. EV production is stalling. Light vehicle production fell by 320,000 units in 2024 compared to the previous year.
Tourism also looked promising in 2025. Nearly 40 million visitors returned, just shy of pre-pandemic levels.
But a recent earthquake in Myanmar has made things worse for Thailand, raising safety concerns and threatening to hit one of the few sectors that was growing.
A vulnerable economic model with old problems
Thailand’s economy relies heavily on exports, particularly to the US and China. When global trade is strong, that works. When it’s not, Thailand gets hit first. And that’s what’s happening now.
Behind the scenes, structural problems have piled up. According to a report by Deloitte, Thailand’s household debt stands at 89% of GDP, with over 17% of households in non-performing loan territory.
Public debt is also rising. These are not temporary issues. They’re deep-rooted and limit how much domestic demand can help when exports fall short.
Private investment is also drying up. Credit conditions are tight, especially for small and mid-sized businesses.
Private loan growth is slowing, and the only thing holding up investment numbers is government spending.
Thailand’s central bank is cutting interest rates, but with limited room left.
The country’s old strategy, which depended on low-cost manufacturing, a weak baht, and strong export dependency, is out of sync with today’s world.
Tariffs are not the root cause, but they make everything worse
Trump’s 36% tariff on Thai imports, part of his “Liberation Day” policy, is a direct response to what the US calls unfair trade balances.
Thailand’s trade surplus with the US reached $45.6 billion in 2024, making it the 11th largest contributor to the US trade deficit.
Thailand tried to respond by buying more from the US. It was hoped that importing more American goods would soften the blow. But that’s not what the US is really angry about.
The problem isn’t just the numbers, but rather Thailand’s trade restrictions, like quotas, license requirements, and technical rules.
The Office of the US Trade Representative’s latest report highlighted these barriers, especially in agriculture and processed food.
If Thailand thought it could trade its way out of the tariff risk, it misread the situation.
Meanwhile, talks between Thailand and the US were postponed last week. This makes a July tariff implementation more likely.
If that happens, Thailand stands to lose around $8 billion in exports, or 2.3% of total export value, according to Thai government estimates.
The central bank is out of ammunition
The Bank of Thailand has now cut rates to 1.75%, down from 2.25% in January. That’s the second cut this year and the third since last October.
While it’s technically still above zero, the BoT doesn’t have much room left to stimulate demand through monetary policy.
Inflation remains low, with headline inflation being just 1.08% in February.
Additionally, the baht is surprisingly strong, up 11% year-on-year. But that’s not necessarily good news.
A stronger baht hurts exporters even more.
Governor Sethaput Suthiwartnarueput has been clear. The economy is facing what he calls a “storm.” He warned that the structure of Thailand’s economy is being threatened by the trade war.
Even with strong foreign exchange reserves that amount to $276 billion, the central bank is being forced into a corner.
There’s talk of legal changes that could merge operational and reserve accounts, risking those reserves and raising alarm bells over fiscal discipline.
Where things are headed, and why it’s different this time
This isn’t like the 1997 crisis, when Thailand ran out of dollars and had to devalue the baht. The reserves are there. The currency is stable. But the growth engine is broken.
The country’s pillars, exports, tourism, and manufacturing, are all under pressure. And unlike in previous cycles, the domestic economy is too weak to compensate.
Perhaps Thailand’s economy is not collapsing, but it is definitely stagnating. That’s a more dangerous problem because it doesn’t trigger immediate panic. It just lingers.
The most worrying part is that the government still appears to be treating this as a short-term shock.
More stimulus, more rate cuts, more trade negotiations. But this isn’t temporary. Thailand’s old economic model is not equipped for today’s global economy.
A country that once benefited from being deeply integrated into global supply chains is now being punished for it.
If Thailand doesn’t adjust quickly by tackling household debt, fixing trade barriers, attracting new investment, and building real domestic demand, it could fall behind in a region where others are still growing.
Other countries, like Malaysia and Vietnam, are finding ways to reinvent themselves. Thailand, for now, is playing defense.
And defence, in this environment, is not a growth strategy.
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