Experts urge reform as Thailand’s growth slows to 2.7% in 2025

 

Thailand’s economy is at a pivotal moment as it contends with sluggish growth and structural issues that are expected to cap GDP growth at 2.7% in 2025. Despite strengthening tourism and agriculture sectors, challenges like a vast informal economy, declining exports and global headwinds remain threats to progress.
 

 

          Growth Concerns and Monetary Policy
 
Supavud Saicheua, chair of the National Economic and Social Development Council (NESDC) and advisor at Kiatnakin Phatra Financial Group, said that while inflation remains low, the economy’s growth languishes at below 3%, creating difficulties in maintaining stability within acceptable parameters.

 

 

In response, he said, the best bet would be to cap the policy rate at 2% to ease borrowing constraints and stimulate growth, noting: “I believe the policy rate, which is described as neutral and not overly aggressive, is high – particularly given that our GDP growth is less than 3%. While inflation is expected to return to target, it has not and will not do so due to low inflation in larger countries, such as China, and a negative producer price index for 18 months. Plus, banks are not issuing loans, so where will the inflation come from?”

 

 

 

          Market Sentiment and Policy Impact
 
Pipat Leuangnaruemitchai, chief economist at KKP Financial Group, said US President-elect Donald Trump’s potential policies would have both negative and positive implications for Thailand’s economy.

 

Notably, he said, the absence of Long-Term Equity Fund (LTF) measures diminished the Thai market’s appeal, not to mention the government’s controversial proposal for entertainment complexes as a solution to illegal gambling.
 

 

 

 

While acknowledging strong investor interest in this initiative, he emphasised the need for balanced policies to ensure social harmony while exploring economic opportunities.

 

 

 

          Structural Challenges
 
At the heart of Thailand's economic challenges lies its huge informal economy, which accounts for a staggering 48% of the GDP. Household debt, meanwhile, has soared to 104% of the GDP, with informal loans further exacerbating the issue. Dr Pacharapoj Nantaramas of Krungthai Bank warned that this shadow economy requires urgent integration into the formal sector to enhance the nation's economic potential. 

 

 

 

          Sectoral Opportunities and Risks
 
While the automotive industry faces declining production by more than 15% from historical averages, Thailand’s agriculture and tourism industries have good growth potential.

 

Supavud said China’s limited agricultural capacity – less than 10% of global arable land – presents an opportunity for Thailand to enhance its agricultural and food production capabilities and exports.

 

 

The tourism sector, traditionally a cornerstone of the Thai economy, is expected to approach pre-pandemic levels with 39 million arrivals in 2025. Meanwhile, Pacharapoj said that efforts to create “man-made destinations” will help attract high-spending tourists, potentially increasing pre-visitor spending by 19% to 58,300 baht per person per trip.
 

 

 

 

 

 
          Export Challenges
 
Exports are projected to grow by just 2% in 2025, down from 4% in 2024. Both Krungthai and KKP experts say that this decline is a reflection of global trade tentions and tariff risks. The return of Trump as US president could worsen the situation, with increased barriers for Thailand.

 

“In the first half of the year [2024], the economy maintained momentum as the global economy was performing well and exports continued to rise. The second half, however, raised concerns as both the government and the private sector must monitor the weakening momentum caused by a variety of external factors,” Dr Pacharapoj explained.

 

 

 

 

          Government Stimulus and Investment
 
The government has introduced tax cuts and targeted financial aid to stimulate consumption, though experts warn that these may only have short-term effects. Public investment is expected to grow by 5.1%, contrasting with private investment, which lags at 3%. The global minimum tax on multinationals poses further hurdles to foreign investment.
 

 

 

          Path Forward
 
To overcome these economic challenges, the experts have said Thailand should prioritise the following:
 

• Integrating the informal economy
• Innovating tourism to attract high-value visitors
• Enhancing competitiveness in industries like semiconductors
• Implementing debt management solutions
• Creating a favourable environment for foreign investment under global tax regulations

 

As Thailand navigates these challenges, the success of these initiatives will prove crucial in determining whether the nation can break free from its current below-potential growth trajectory and establish a more robust economic foundation for the future.

 

 

The coming months will be crucial as Thailand seeks to stabilise its economy and leverage its strengths in agriculture and tourism to chart a sustainable path forward.