KResearch compares Thailand's economy to the "Sick Man of Asia."

Burin Adulwattana, Managing Director and Chief Economist of Kasikorn Research Center (KResearch), stated that the Thai economy is concerning. The GDP forecast is 2.4%, with increased downside risks, mainly from the trade war. He noted that the economy lacks positive factors, with weak domestic demand, leading to Thailand being called the "Sick Man of Asia." He emphasized the need for quick-win policies, including debt resolution.

Burin also pointed out that, amid the slowing economy, lower-income groups are struggling with both spending and debt repayment. Therefore, measures to stimulate spending among those with purchasing power and attract more foreign investment to boost GDP are necessary.

He further noted that, although the overall economy is growing slowly, the informal economy is thriving and holds significant amounts of money. The challenge is finding ways to bring more of this informal economy into the formal sector to support greater economic growth.

The main economic drag for Thailand stems from Trump's "Tariff 2.0" policy, including higher tariffs. While the impact of the tariff increase is already factored into the forecast at 0.3%, if the tariffs on Thai exports rise to 10% or more, the impact could exceed expectations and significantly harm the Thai economy. Therefore, attention must be paid after April 2 for clarity on Trump's tariff policy.

Amid the ongoing challenges of a chronic trade deficit and rising public debt in the US, the Mar-a-Lago Accord, a potential solution discussed for 2025, is gaining attention. It is similar to the Plaza Accord of 1985 that the US used. The main goal of the Mar-a-Lago Accord is to weaken the US dollar to improve the competitiveness of US exports, revive the manufacturing sector, and reduce US debt. Allied countries relying on US security protection would be required to purchase 100-year government bonds.

Rujipan Assarut, Assistant Managing Director at KResearch, assessed the impact of the trade war on the global car market. He believes it will lead to increased competition, a worsening global oversupply of cars, and a decline in car prices. Major car-producing countries like Japan, Germany, and South Korea will diversify their export markets and invest in the US to produce cars for the US market, mitigating the impact of US import tariffs.

The increased competition in the global car market is expected to worsen the global oversupply of cars, with global car production exceeding sales by 16%. Additionally, car prices are likely to decline in global markets, except in the US, where Chinese automakers are expected to continue their pricing strategy. This increased competition is expected to affect Thailand's car exports and the car manufacturing sector, which currently relies on exports for 67% of its production.

Kevalin Wangpichayasuk, Deputy Managing Director of KResearch, added that the impact of Trump's tariff hikes could risk a 1.0% contraction in Thailand’s industrial production in 2025. While Thailand cannot rely as heavily on tourism as before, manufacturers and exporters of electronics and electrical appliances will be directly impacted by the tariffs and reduced US orders due to dependence on the US as a key export market. The car, steel, and aluminum industries will face indirect effects from heightened competition amid the global economic slowdown.

As a result, low-skilled labour in the manufacturing sector faces income risks, with signs of increased factory closures, particularly in the electronics and automotive industries. These closures are mainly occurring in medium to large-sized factories, which will likely become more challenging when the US imposes reciprocal tariffs in early April.

Factory closures are increasing in the first two months of 2025, especially in industries like electronics and automotive. The trend shows more closures among medium to large businesses, particularly those with registered capital over 100 million baht, compared to the past when most closures were in small businesses with registered capital of only 2 million baht.

This aligns with a continuous reduction in working hours across various manufacturing sectors, with current hours falling 11% below the previous standard of over 40 hours per week. While factory closures are stabilizing, the accumulated number of closures remains high, with nearly 5,000 factories closed since 2021.

Moreover, Thailand is unlikely to rely as much on tourism as before, as the number of tourists from two main countries, China and Malaysia, has decreased. Additionally, the increased competition for tourists and changing behaviours make it challenging for the Thai tourism market to return to pre-COVID levels or exceed them.

Nattaporn Treratsirikul, Deputy Managing Director of KResearch, explained that if Thailand faces a 10% increase in reciprocal tariffs, it could negatively impact GDP by -0.3%. This impact is already factored into the 2025 GDP growth forecast of 2.4%.

However, if the US imposes an additional 25% import tariff on Thailand, the GDP impact could rise to -0.6%. The current GDP growth projection for 2025, set at 2.4%, faces a risk of revision downward but is expected to remain above 2.0%.

Furthermore, Thailand’s economic growth in the second half of 2025 is expected to show minimal growth on a quarter-to-quarter basis due to the effects of the trade war, a high base from the same period last year, and reduced economic momentum.