Thailand Monthly Thailand Economic MonitorEconomic Monthly Monitor 15 May 2025 Thailand’s economic performance remained mixed in March with stable private consumption and robust exports offset by weak private investment amid rising uncertainty. While fiscal stimulus supported consumption, softening consumer confidence and weak manufacturing production pose risks to the outlook. The tourism recovery slowed, with fewer tourist arrivals particularly from China. Inflation turned negative for the first time in over a year, prompting the Bank of Thailand to lower its policy rate amid a dimmer economic outlook. Financial markets experienced volatility due to global trade uncertainty. The Thai baht depreciated against the US dollar in early April, before notably appreciating in the following weeks. March activity data suggest the economy continues to grow Figure 1: Private consumption and exports continued to modestly, supported by private consumption and exports, grow but manufacturing production declined but weak consumer confidence and manufacturing (Index, Jan 2021 = 100) 150.0 production pose risks to the outlook. In March, private Manufacturing Production Index consumption expanded modestly by 3.8 percent (year-on-year), Private Consumption Index Goods Exports supported by the ongoing recovery and fiscal stimulus. However, 130.0 contracting loan growth and softening consumer confidence— driven by trade policy uncertainty and slowing tourist arrivals— 110.0 are expected to weigh on the consumption outlook. In March, the consumer confidence index fell to its lowest level in 5 months at 90.0 56.7. Despite stable consumption and solid exports, manufacturing production continued contracting since late 2022, reflecting ongoing inventory rundown and reduced reliance on Source: Haver Analytics; CEIC; World Bank staff calculations. domestic output, particularly in electrical equipment and textiles Figure 2: Tourism declined substantially in the past (Fig. 1). Weak production in the automotive sector also persists, three months aligned with declining passenger and commercial vehicle sales. (Tourist arrivals, percent of the 2019 level) 150 Tourist arrivals declined sharply, due to fewer visitors from Total China ROW China. In April, tourist arrivals declined by 7.6 percent year-on- 100 year, reaching 80 percent of pre-pandemic levels (Fig. 2). While tourist arrivals from most other countries continued to expand 50 from last year, arrivals from China, Republic of Korea, and ASEAN declined. However, most visitors came from Malaysia, 0 accounting for 14 percent of total arrivals. Chinese visitors Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 dropped by more than 40 percent year-on-year over the past three months to only 35 percent of the pre-pandemic levels. The Figure 3: Exports grew strongly, similar to other major slowdown was likely driven by safety concerns, especially after Asian exporters (Percent, year-on-year) the recent earthquake and promotion of domestic travel in China. -5.0 0.0 5.0 10.0 15.0 20.0 Taiwan Thailand’s goods exports continued to strengthen due to Thailand frontloading amid trade policy uncertainty. Goods exports Vietnam Malaysia continued double-digit growth for two consecutive months at Indonesia 17.8 percent year-on-year in March, the highest in three years Philippines 2025 (Jan-Sep) Mar (Fig. 3). The expansion was driven by manufacturing exports, China particularly computers and parts, electronics, and electrical Singapore Korea appliances. This improvement was supported by accelerated exports to the US and China, due to frontloading shipments amid Source: Haver Analytics; World Bank staff calculations. rising global trade uncertainties. Exports of agricultural products THAILAND MONTHLY ECONOMIC MONITOR | 1 such as rice, sugar, and cassava declined due to stiffer Figure 4: Thai exports to the US account for 10 percent competition and stronger Thai baht. The trade surplus narrowed of GDP (Percent share of GDP, 2024) slightly, as rising exports were accompanied by higher imports— 90 especially from Taiwan and Vietnam—while imports from China 80 declined. 70 60 Global trade policy uncertainty is expected to weigh on 50 40 investment and growth. With exports to the US accounting for 30 18 percent of total exports (about 10 percent of GDP), the 20 country remains highly exposed to shifts in trade policy and 10 global economic activity (Fig. 4). A slowdown in the US, China, 0 Vietnam Malaysia Thailand Indonesia Philippines or the EU could dampen demand for Thai exports and tourism, affecting business investment. The recent decline in the global China US EU Japan Korea ASEAN ROW Manufacturing PMI, which contracted for the first time in four Source: CEIC; World Bank staff calculations. months, signals weaker export demand ahead. In response, the Thai government is seeking to strengthen trade ties with the US, Figure 5: Inflation turned negative for the first time in 13 by reducing trade surplus with the US, easing both tariff and non- months (Percent Year-on-Year) tariff barriers, tightening rules of origin enforcement, and Indonesia Malaysia promoting Thai investment in the US. Philippines Thailand Vietnam 6.0 The Bank of Thailand reduced the policy rate to 1.75 percent amid a dimmer economic outlook and subdued inflation. In April, headline inflation turned negative for the first time in 13 1.0 months, falling to -0.22 percent, the lowest among ASEAN countries (Fig. 5). The decline was driven mainly by lower energy prices as global oil prices continued to fall and government -4.0 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 expanded subsidies to ease living costs. The recent decision to Source: CEIC; World Bank staff calculations. cut electricity prices by 4 percent to 3.99 from May to August is expected to keep inflation subdued in the coming months. In Figure 6: The fiscal budget deficit widened in the first contrast, core inflation remained elevated at 0.9 percent. On half of FY25 (First half of each FY. percent of estimated GDP, GFS basis) April 30, the Monetary Policy Committee reduced its policy rate 30 0.0 by 25 bps to 2.0 percent, the third rate cut since October—citing Revenue Expenditures Fiscal balance, RHS 25 -2.0 a dimmer economic outlook, subdued inflation, and continued tight financial conditions. In Q4 2024, the household debt 20 -4 -4.0 declined further to 88.4 percent of GDP, although it remained the 15 -6.0 highest among ASEAN peers. The BOT expects growth to slow -7 -6 at 1.3-2.0 in 2025, depending on future trade policy. 10 -8.0 5 -10 -10 -10.0 Fiscal sustainability is under pressure, as the government faces the need for additional stimulus. In the first half of FY 0 -12.0 H1 FY21 H1 FY22 H1 FY23 H1 FY24 H1 FY25 2025 (October-March), the central government's fiscal deficit Source: CEIC; World Bank staff calculations. (GFS basis) widened to 6.3 percent of GDP, higher than 3.7 percent in the same period last fiscal year, due to accelerated current and capital spending (Fig. 6). Fiscal revenue also increased, supported by higher collection from personal income tax and VAT. However, the increase in spending outpaced revenue gains, as both current and capital budget execution accelerated. As part of the fiscal stimulus, the government rolled out the first and second phase of THB10,000 cash transfer covering 17.5 million people, including the State Welfare Card holders and the elderly. Plans for a third phase targeting 2.7 million recipients aged 16-20, via a digital wallet application, remain under review, with a THB 150 billion budget still available THAILAND MONTHLY ECONOMIC MONITOR | 2 for fiscal stimulus. In March, public debt rose to 64.4 percent of GDP, driven by borrowing to finance the fiscal deficit. The financial market has been highly volatile, tracking global financial market developments. In the first week of April, the baht depreciated against the US dollar, and equity prices fell following the US announcement of reciprocal tariffs. However, asset prices largely recovered in subsequent weeks after the pause in tariff increases. The Thai baht appreciated— mirroring other major ASEAN currencies—supported by higher portfolio inflows, particularly into the bond market, and a strong current account surplus, reaching 32.9 per US dollar by the first week of May. The 5-year government bond yield fell by 15 basis points in April. Foreign inflows to the government bond, in the same period, reached its highest level since December 2022 at THB 55.6 billion. News Highlights: Issues to Watch: • Thailand cuts Chinese tourist target and plans recovery • Trade: How will potential US trade policy changes affect the campaign. (Khaosod, Link). Thai economy? • The next phase of the government's flagship 10,000 • Inflation: Will global oil price continue to fall and affect transfer requires some revisions (Bangkok Post, Link). headline inflation continue to decline in coming months? • Bank of Thailand cuts rate as trade policy darkens • Fiscal: Will the government roll out the remaining THB outlook (Bangkok Post, Link). 10,000 cash handout? Prepared by Warunthorn Puthong (Economist). For further questions, please email wputhong@worldbank.org THAILAND MONTHLY ECONOMIC MONITOR | 3 Selected Economic and Financial Indicators 2024 2024 2025 2024 2025 Q2 Q3 Q4 Q1 Dec Jan Feb Mar Apr GDP and Inflation (%YoY) GDP growth (real) 2.5 2.3 3.0 3.2 - Contribution to GDP growth: Private consumption 2.6 2.8 2.1 1.9 - General Government consumption 0.4 0.1 1.0 0.8 - Gross fixed capital formulation: Private -0.3 -1.2 -0.5 -0.4 - Gross fixed capital formulation: Public 0.3 -0.3 1.8 1.6 - Net Exports of goods and services 1.3 3.4 0.2 2.4 - Change in Inventory 0.0 -2.6 -1.7 -2.7 - Residual and errors -1.7 0.0 0.1 -0.4 - GDP, nominal (USD Billion) 527 123 133 142 - GDP, nominal (THB Billion) 18579 4,521 4,616 4,819 - Consumer Prices Index: Headline 0.4 0.8 1.0 1.0 1.1 1.2 1.3 1.1 0.8 -0.2 Consumer Prices Index: Core 0.6 0.4 0.4 0.8 0.9 0.8 0.8 1.0 0.9 1.0 Output Indicators Manufacturing Production Index (%YoY) -1.2 0.3 -0.8 -1.7 -1.9 -1.8 -1.1 -3.9 -0.7 Capacity Utilisation (%) 59.0 58.3 58.8 57.7 60.9 56.5 59.9 59.2 63.7 Farm Production Index (%YoY) -1.0 -1.5 0.0 0.3 4.8 2.2 2.8 4.4 7.1 Service Index (%YoY) 8.4 8.0 10.9 8.7 6.4 6.9 4.8 6.4 7.9 Labor Market Unemployed workers (Thousand Persons) 402.2 429.1 413.9 358.2 Unemployment rate (%) 1.0 1.1 1.0 0.9 Underemployment/1 (Thousand Persons) 192.4 162.4 191.9 223.6 Underemployment (%) 0.5 0.4 0.5 0.6 Balance of Payments (USD million) Current account 11,089 1,120 2,328 4,235 10,475 2,046 2,657 5,490 2,328 Current account (% of GDP) 2.1 0.9 1.8 3.0 7.4 4.7 6.0 12.5 5.3 Trade Balance 19,274 5,655 5,773 5,351 8,174 1,882 404 4,366 3,405 Exports of goods (%YoY) 23 4.3 8.9 10.6 15.0 8.4 12.9 13.9 17.7 Imports of goods (%YoY) 25 0.8 11.3 10.7 7.1 13.4 7.5 4.1 9.4 Service, primary and secondary Income -8,184 -4,535 -3,445 -1,116 2,301 165 2,253 1,124 -1,077 Tourist Arrivals (Thousand Persons) 35,546 8,131 8,588 3,627 9,549 3,627 3,709 3,119 2,720 Financial account -16,148 -2380.2 550.9 -9221.8 - Financial account (% of GDP) -3.0 -1.9 0.4 -6.5 - Foreign direct Investment, net 2,429 -854 -514 2,496 - Portfolio flows -19,977 -3,052 -1,874 -10,557 - Others Investments 562 1,661 2,286 -1,606 - Central Government Budget (Fiscal Year, THB billion)/2 Revenue 3,433 953 1,019 763 779 278 272 222 285 - Expenditure 4,014 1,023 1,069 1,185 951 383 337 265 349 - Central Government balance -581 -70 -50 -422 -172 -105 -66 -43 -63 - Central Government balance (% of GDP) -3.1 -1.6 -1.1 -8.8 -3.6 Public debt (% of GDP) 63.2 63.3 63.2 63.8 64.4 63.8 64.1 64.2 64.4 - Financial Markets Indicators Policy rate (%) 2.25 2.50 2.50 2.25 2.00 2.25 2.25 2.00 2.00 1.75 M2 (%YoY) 2.30 2.4 2.3 2.7 2.3 2.4 2.8 2.5 1.7 - Household Debt (% of GDP) 88.4 89.7 88.9 88.4 SET Index 1,400 1,301 1,449 1400 1158 1,400 1,315 1,204 1,158 1,197 Thai government bond yield, 10-year (%) 2.25 2.66 2.47 2.25 2.06 2.25 2.30 2.17 2.06 1.88 Foreign exchange reserve 262 253 269 262 270 262 266 268 270 280 and FX forward position (USD billion) USD/THB, end of period 33.99 36.85 32.29 34.0 33.9 33.99 33.65 34.08 33.93 33.41 THB NEER, average 121.0 117.2 121.8 126.3 127.7 127.1 127.7 128.3 127.0 125.9 1/ Underemployment accounts for workers who are occupied less than 35 hours per week and are available for additional work (defined by BOT). 2/ Fiscal Year 2025 begins in October 2024 and ends in September 2025, Fiscal Balance according to GFS. Source: Office of the National Economic and Social Development Council, Bank of Thailand, Office of Industrial Economics, Ministry of Industry National Statistical Office of Thailand, Fiscal Policy Office, Public Debt Management Office, Haver Analytics. THAILAND MONTHLY ECONOMIC MONITOR | 4