A disappointing GDP rate in the fourth quarter of 2024 raises the probability that the Bank of Thailand will cut the policy rate in the first half this year, say economists, while being a potential target of US reciprocal tariffs puts the country's growth this year at risk.
Despite strong exports, resurgent tourism and stimulus handouts, GDP growth was weighed down by consumer belt-tightening, which hurt auto and home purchases.
As a consequence, GDP growth averaged 2.5% for 2024, below the market's expectation of 2.7%, said Kuala Lumpur-based Maybank.
The National Economic and Social Development Council kept its growth forecast in a range of 2.3-3.3% for 2025, with a midpoint of 2.8%.
While Maybank maintained its 2025 GDP growth outlook at 2.8%, it is alert to downside risks on the external and domestic fronts, the investment banking group said in a research note.
BMI, a unit of London-based Fitch Solutions, said while Thai GDP grew at the strongest pace in 2024's final quarter, full-year growth of 2.5% missed the 2.7% target set by the Bank of Thailand.
BMI maintained its projection for Thai GDP growth of 3% this year, backed by extensive fiscal stimulus support.
However, growth in the US and China is likely to lose steam over the course of 2025, raising doubts that Thai shipments will persist going forward, said the research firm.
"The latest growth tally adds urgency for the Bank of Thailand to act," BMI noted.
"With growth falling short of the central bank's estimate, the likelihood of a 25-basis-point [bps] cut at the upcoming meeting has significantly increased."
BMI forecasts the central bank will lower its policy rate by an additional 50bps by the end of the year, supporting investment activity over the coming quarters.
Maybank said key risks to the 2025 growth outlook include US reciprocal tariffs, economic uncertainty delaying the realisation of investment commitments, and credit tightening impinging on private residential investment and consumer spending.
Thailand's weighted applied tariffs on US goods averaged 6.2%, compared with 0.85% imposed by the US on Thai goods.
Judging by tariff differentials on product categories, meat, animal products and vegetables will be the most vulnerable to US President Donald Trump's tariffs.
The tariff differential also weighs on electronics and machinery, which comprises more than half of Thai goods shipped to the US and would be the most consequential if targeted, noted Maybank.
"Fiscal and monetary policy must respond to deterioration on the growth front. We now expect the Bank of Thailand to keep its policy rate on hold at 2.25% at its next meeting on Feb 26 but, in its statement, pave the way for a 25bps cut in the first half," said the investment bank.
