As Thailand enters 2025, the country's economic landscape remains shaped by a delicate balance of fiscal stimulus, monetary policy adjustments and shifting global market dynamics.
While inflation has remained subdued, economic growth faces headwinds from weak exports, geopolitical uncertainties and structural challenges.
State stimulus measures and a resilient tourism sector offer potential recovery paths. In this evolving financial landscape, certain key trends and market opportunities will define Southeast Asia's second-largest economy in 2025.
Throughout 2024, Thailand's inflation rate remained below the Bank of Thailand's target range of 1-3%. In December 2024, the Consumer Price Index rose by 1.23% year-on-year, up from 0.95% in November, marking the first return to the target range in seven months. Despite this uptick, the average inflation rate for 2024 was 0.4%, the lowest in four years.
In response to subdued inflation and economic growth concerns, the central bank reduced the policy interest rate by 25 basis points to 2.25% in October, its first rate cut since September 2023. Subsequently, it maintained this rate in December, citing increased economic uncertainties and the need for policy flexibility.
The central bank projected economic growth of 2.9% in 2025 and inflation within its 1-3% target range, at 1.1%.
Structural challenges
EBC analysts caution that the effectiveness of the rate cut may be constrained by deeper structural challenges. Thailand's export sector faces persistent headwinds from global trade disruptions, while private sector investment remains subdued. These factors add layers of complexity to efforts aimed at revitalising economic growth in an increasingly uncertain global landscape.
Finance Minister Pichai Chunhavajira has signalled the possibility of further rate reductions, emphasising the necessity of coordinated monetary and fiscal measures to reinvigorate Thailand's economy.
As a critical node in Southeast Asia, Thailand's financial markets remain highly sensitive to external factors, including shifting US Federal Reserve policies and geopolitical tensions that influence global trade flows. EBC sees the interplay between domestic challenges and external pressures as presenting both risks and opportunities for traders and investors, highlighting the need for strategic decision-making.
Thailand's economic recovery has been significantly influenced by the resurgence of its tourism sector. In 2024, the country welcomed 35.5 million foreign visitors, contributing substantially to economic growth.
Despite this rebound, the Stock Exchange of Thailand (SET) has faced persistent challenges, underperforming regional peers due to political unrest and economic policy uncertainty. This disconnect between tourism recovery and stock market performance suggests underlying economic challenges that may affect investor sentiment and present potential value opportunities for traders and investors.
Fiscal boost
In response to these challenges, the government has implemented a series of fiscal measures, including a 450-billion-baht stimulus programme targeting 45 million citizens, a minimum wage increase of 2.9%, and tax incentives of up to 50,000 baht per person to stimulate consumer spending across various sectors.
EBC notes sectors such as consumer goods and tourism-linked industries may benefit from these initiatives, while infrastructure projects tied to Thailand's broader development agenda may also offer growth opportunities for long-term investors. However, the effectiveness of these measures will hinge on Thailand's ability to implement deeper structural reforms to ensure sustainable growth.
A key factor shaping Thailand's economic trajectory this year is the evolving trade relationship between the United States and China. With newly imposed US tariffs on Chinese goods in effect, the world's second-largest economy may need to ramp up stimulus. If weak consumer spending persists in the country, outbound tourism is likely to slow. China remained the largest source market for tourists to Thailand last year despite safety concerns.
This uncertainty reinforces the role of gold as a preferred safe-haven asset for local investors as the industry plays a significant role in the Thai economy. EBC analysts suggest traders and investors monitor trade developments, as gold and other commodities may play a more central role in portfolio risk management strategies in response to global economic uncertainty.
EBC Financial Group is a global brokerage firm with a presence in key financial hubs worldwide. Visit www.ebc.com
