Thailand Monthly Thailand Economic MonitorEconomic Monthly Monitor 22 April 2025 Thailand's economic activity showed mixed signals in February. Steady consumption and strong exports were offset by a sharp contraction in private investment due to rising uncertainty. Goods exports remained a key driver, bolstered by robust shipments to the US and China, in part due to frontloading amid rising global trade uncertainties. However, mounting risks from global trade uncertainty are a concern. The tourism recovery softened, influenced by seasonal factors and a decline in Chinese arrivals. Additionally, the recent earthquake may negatively impact future tourist numbers. Inflation continued to decline in March, prompting further monetary easing. Financial markets weakened as risk-off sentiment and policy uncertainty eroded investor confidence, resulting in Thai baht depreciation despite a strong current account surplus. Economic activity showed mixed signals, with stable Figure 1: Goods exports remained solid while manufacturing contracted private consumption and strong exports offset by a sharp (Percent, year-on-year) decline in private investment amid rising uncertainty. In 25 Manufacturing Production Index 20 Service Production Index February, private consumption expanded modestly, supported Private Consumption Index 15 by the ongoing recovery and fiscal stimulus. The third phase of Goods Exports 10 the Digital Wallet (THB 10,000 cash transfers to 3 million elderly) 5 was implemented but high household debt and tighter credit 0 standards continued to weigh on spending. Goods exports -5 maintained strong growth, partly due to accelerated shipments -10 amid rising global trade uncertainty (Fig. 1). However, ongoing -15 Jan-22 Jan-23 Jan-24 Jan-25 uncertainty weighed on sentiment; private investment index Source: Haver Analytics; CEIC; World Bank staff calculations. contracted sharply, mirroring declines in consumer confidence and continued weakness in manufacturing output (Fig. 2). The Figure 2: Industrial production, particularly motor vehicles, contracted sharply recent earthquake in Myanmar and northern Thailand has added (Value added production index, Percent, year-on-year) further uncertainty regarding the extent of infrastructure damage -20 -15 -10 -5 0 5 10 15 20 and potential impacts on tourism. Value Added Production Index Motor Vehicles, 11% 2024 Tourist arrivals, particularly from China, softened. In Other Non Metallic Mineral, 5% Computer, Elec.&Optical, 9% 2025 (Jan-Feb) February, tourist arrivals declined by 6.9 percent year-on-year, Basic and fabricated metal, 6% reaching 87 percent of pre-pandemic levels (Fig. 3). While most Rubber & Plastic, 9% tourist arrivals from major sources have surpassed pre- Coke&Refined Petroleum, 11% Textile, apparel, leathers, and… pandemic levels, Chinese arrivals remained below and dropped Chemicals & Chemical, 9% by 40 percent year-on-year to 35 percent of the pre-pandemic Electrical Equipment, 4% Food and beverages, 21% levels. The slowdown was driven by the timing of the Lunar New Machinery & Equip N.E.C., 3% Year, which took place earlier in late January. The Ramadan Source: CEIC; World Bank staff calculations also weighed on arrivals from key markets (e.g. Malaysia, Indonesia, India, and the Middle East). Additionally, the recent Figure 3: Tourism declined in February (Tourist arrivals, percent of the 2019 level) earthquake may dampen arrivals in April, as uncertainty about 150 the extent of the damage could affect tourist confidence. Total China 100 Thailand’s goods exports continued to strengthen in February, driven by strong exports to the US and China. 50 Goods exports continued double-digit growth for two consecutive months at 13.9 percent year-on-year in February, 0 the highest in four months. Manufacturing exports, including Jul-23 Jul-22 Jul-24 Oct-22 Oct-23 Oct-24 Apr-22 Apr-23 Apr-24 Jan-22 Jan-23 Jan-24 Jan-25 agro-manufacturing, electrical appliances, rubber, chemical, and electronics contributed to the solid expansion. This improvement Source: CEIC; World Bank staff calculations. THAILAND MONTHLY ECONOMIC MONITOR | 1 was supported by accelerated exports to the US and China, due Figure 4: Exports to major trading partners continued to frontloading amid rising global trade uncertainties (Fig. 4). to expand Meanwhile, exports to Japan and ASEAN started to contract. (Percent, 3mma, year-on-year) EU27 ASEAN Global trade policy uncertainty poses a significant risk to China United States Total Thailand’s export-driven economy. With exports to the US 30 accounting for 18 percent of total exports (about 10 percent of GDP), the country remains highly exposed to shifts in trade policy and global economic activity. Uncertainty surrounding unfolding trade measures is expected to weigh on both exports -20 and investment. A slowdown in major markets—particularly the US, China, or the EU—could dampen demand for Thai goods and services, including tourism, with knock-on effects on Source: CEIC; World Bank staff calculations. business investment. The recent decline in the global Figure 5: Inflation remained the lowest among Manufacturing Purchasing Managers’ Index (PMI) also signals emerging market peers weaker export demand in the months ahead. (Percent Year-on-Year) Indonesia Malaysia Philippines Thailand Inflation declined for the third consecutive month in March Vietnam due to falling energy prices and weak domestic demand. In 6.0 March, headline inflation fell to 0.8 percent, remaining below the Bank of Thailand’s (BOT) 1–3 percent target range for two consecutive month and remaining the lowest among ASEAN 1.0 (Fig. 5). The decline was broad-based, driven by lower fuel, utility, and medical costs, alongside core inflation dropping to 0.9 -4.0 percent, reflecting softer domestic demand. Energy price Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 inflation contracted for the first time in five months due to falling Source: CEIC; World Bank staff calculations. global oil prices and lower electricity tariff rates. Given anchored Figure 6: The fiscal budget deficit widened inflation expectations, BOT has lowered the policy rate twice (Percent of estimated GDP, GFS basis) since October 2024, to 2.0 percent to alleviate household debt- 10 servicing pressure amid recent tightening credit standards. 5 Additionally, the BOT also implemented eased macroprudential policies, including relaxing mortgage loan-to-value ratios. 0 -5 The central government’s fiscal deficit widened as -10 increased spending outpaced stronger tax collection. In the FY 2017-19 FY 2025 first five months of FY 2025 (October-February), the central -15 government's fiscal deficit (GFS basis) widened 6.7 percent of FY 2024 -20 GDP, higher than 4.4 percent same period last fiscal year, due Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep to accelerated current and capital spending (Fig. 6). Fiscal Source: CEIC; World Bank staff calculations. revenue reached its highest level since 2020, supported by Figure 7: THB NEER depreciated on general US dollar higher collection from personal income tax, VAT, and fuel excise strength tax—reflecting the termination of the diesel tax cut in April last (Index January 2021=100) 110 year. However, the increase in spending outpaced revenue gains, as both current and capital budget execution accelerated. 105 The Thai baht depreciated in April as global markets shifted 100 to a risk-off mode, despite the highest current account surplus in five years. In the first week of April, the baht’s 95 nominal effective exchange rate (NEER) depreciated by 1.5 90 percent, in line with other major ASEAN currencies (Fig. 7). The Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 US announcement of reciprocal tariffs increased policy IDR MYR PHP THB uncertainty surrounding global trade. As a result, the baht Note: Average of the first 7 days for April depreciated despite an improved current account surplus. The Source: CEIC; World Bank staff calculations. THAILAND MONTHLY ECONOMIC MONITOR | 2 current account surplus rose to USD 5.5 billion (13 percent of Figure 8: The current account surplus reached a post- GDP)—the highest level since the pandemic—driven by a 2020 high (USD million) stronger goods trade balance and lower fuel import bills (Fig. 8). 6000 Investor sentiment remained weak. The Thai stock market index 4000 declined by 7.2 percent in the first week of April, continuing a four-month downward trend amid global uncertainty and a 2000 subdued domestic recovery. The 5-year government bond yield 0 fell by 12 basis points during the same period. Foreign portfolio -2000 investment saw net outflows from the equity market, partially -4000 offset by net inflows into government bonds. -6000 Jan-22 Jan-23 Jan-24 Jan-25 BOP: USD: Trade Balance BOP: USD: Services, Primary Income & Secondary Income BOP: USD: Current Account Balance Source: CEIC; World Bank staff calculations. News Highlights: Issues to Watch: • Second 'You Fight, We Help' phase may aid 1.7m • Trade: How will potential US trade policy changes affect debtors. (Bangkok Post, Link). the Thai economy? • Thailand maps out strategy for tariff negotiations in US. • Tourism: Will the recent earthquake and trade policy (Bangkok Post, Link). uncertainty affect the tourism outlook? • Thailand aims for over 3percent growth with B150bn • Fiscal: Will the government roll out the remaining THB stimulus (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 Q1 Q2 Q3 Q4 Nov Dec Jan Feb Mar GDP and Inflation (%YoY) GDP growth (real) 2.5 1.7 2.3 3.0 3.2 Contribution to GDP growth: Private consumption 2.6 3.6 2.8 2.1 1.9 General Government consumption 0.4 -0.3 0.1 1.0 0.8 Gross fixed capital formulation: Private -0.3 0.8 -1.2 -0.5 -0.4 Gross fixed capital formulation: Public 0.3 -1.9 -0.3 1.8 1.6 Net Exports of goods and services 1.3 -0.8 3.4 0.2 2.4 Change in Inventory 0.0 -0.1 -2.6 -1.7 -2.7 Residual and errors -1.7 0.4 0.0 0.1 -0.4 GDP, nominal (USD Billion) 527 130 123 133 142 GDP, nominal (THB Billion) 18579 4,623 4,521 4,616 4,819 Consumer Prices Index: Headline 0.4 -0.8 0.8 1.0 1.0 1.0 1.2 1.3 1.1 0.8 Consumer Prices Index: Core 0.6 0.5 0.4 0.4 0.8 0.8 0.8 0.8 1.0 0.9 Output Indicators Manufacturing Production Index (%YoY) -1.2 -2.8 0.3 -0.8 -1.7 -3.3 -1.8 -1.1 -3.9 Capacity Utilisation (%) 59.0 61.0 58.3 58.8 57.7 58.2 56.5 59.9 59.0 Farm Production Index (%YoY) -1.0 -2.9 -1.5 0.0 0.3 -0.1 2.1 2.8 3.7 Service Index (%YoY) 8.2 5.6 7.9 10.7 8.5 10.1 6.6 2.9 1.7 Labor Market Unemployed workers (Thousand Persons) 402.2 407.7 429.1 413.9 358.2 Unemployment rate (%) 1.0 1.0 1.1 1.0 0.9 Underemployment/1 (Thousand Persons) 192.4 191.5 162.4 191.9 223.6 Underemployment (%) 0.5 0.5 0.4 0.5 0.6 Balance of Payments (USD million) Current account 11,089 3,407 1,120 2,328 4,235 1,229 2,046 2,657 5,490 Current account (% of GDP) 2.1 2.6 0.9 1.8 3.0 2.8 4.7 6.0 12.5 Trade Balance 19,274 2,495 5,655 5,773 5,351 2,023 1,882 404 4,366 Exports of goods (%YoY) 23 -0.5 4.3 8.9 10.6 9.1 8.4 12.9 13.9 Imports of goods (%YoY) 25 2.6 0.8 11.3 10.7 2.3 13.4 7.5 4.1 Service, primary and secondary Income -8,184 912 -4,535 -3,445 -1,116 -794 165 2,253 1,124 Tourist Arrivals (Thousand Persons) 35,546 9,370 8,131 8,588 9,457 3,150 3,627 3,709 3,119 Financial account -16,148 -5097.2 -2380.2 550.9 -9221.8 Financial account (% of GDP) -3.0 -3.9 -1.9 0.4 -6.5 Foreign direct Investment, net 2,429 1,301 -854 -514 2,496 Portfolio flows -19,977 -4,494 -3,052 -1,874 -10,557 Others Investments 562 -1,779 1,661 2,286 -1,606 Central Government Budget (Fiscal Year, THB billion)/2 Revenue 3,432 698 953 1,019 762 231 277 271 219 Expenditure 4,014 737 1,023 1,069 1,185 308 383 337 261 Central Government balance -582 -39 -70 -50 -423 -77 -106 -67 -43 Central Government balance (% of GDP) -3.1 -0.8 -1.6 -1.1 -8.8 Public debt (% of GDP) 63.2 63.6 63.3 63.2 63.8 64.3 63.8 64.1 64.2 Financial Markets Indicators Policy rate (%) 2.25 2.50 2.50 2.50 2.25 2.25 2.25 2.25 2.00 2.00 M2 (%YoY) 2.30 1.7 2.4 2.3 2.7 2.7 2.4 2.8 2.5 - Household Debt (% of GDP) - 90.7 89.7 88.9 SET Index 1,400 1,378 1,301 1,449 1400 1,428 1,400 1,315 1,204 1,158 Thai government bond yield, 10 year (%) 2.25 2.50 2.66 2.47 2.25 2.29 2.25 2.30 2.17 2.06 Foreign exchange reserve and FX forward position (USD billion) 262 253 253 269 262 264 262 266 268 270 USD/THB, end of period 33.99 36.47 36.85 32.29 34.0 34.29 33.99 33.65 34.08 33.93 THB NEER, average 121.0 118.8 117.2 121.8 126.3 125.0 127.1 127.7 128.3 127.0 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