Bangkok: Krungsri Research reports that the Thai economy will slow to 1.3% growth in the second half of the year, down from 3.0% growth in the first half, pressured by US tariffs and the ongoing political uncertainty. However, it maintains its 2025 GDP forecast at 2.1%, with the Bank of Thailand (BOT) expected to cut interest rates one or two more times within the first quarter of 2026.
According to Thai News Agency, the economic research team at Bank of Ayudhya revealed that the economy is likely to face pressure from multiple sources for the remainder of 2025. External factors include the US import tariff hike to 19%, which is causing Thailand's export sector, which was once a key driver in the first half of the year, to contract. Domestic factors are also becoming more complex and fragile due to political uncertainty during this transitional period. Krungsri Research therefore estimates that, if economic policy implementation continues, the Thai economy is expected to grow in line with the previous forecast of 2.1% for the entire year of 2025. However, the second half of the year is expected to expand by only 1.3% year-on-year, a slowdown from 3.0% in the first half.
A key factor is the loss of momentum in the export sector due to the US increase in import tariffs on Thai products, which increased from 10% in April to 19%, effective August 7th. Furthermore, the weakening global economy will impact international trade and manufacturing activity worldwide. Therefore, Thai exports are expected to grow by only 3.5% in 2025.
Private investment faces increasing challenges. The improved momentum from the pre-accelerated export expansion may lack continuity. Private investment is expected to grow at a low rate of 0.9% for the full year. While there are some positive factors from the government's investment in small-scale infrastructure projects worth 85 billion baht, private investment remains highly fragile amid negative factors such as concerns about domestic political uncertainty, Thai-Cambodian border tensions, a slower-than-expected recovery in the tourism sector, and the potential impact of US trade policies.
The tourism sector is projected to contract for the first time since its COVID-19 recovery. In the first eight months of this year, 21.9 million foreign tourist arrivals to Thailand fell by 7.2% year-on-year. This decline is primarily due to a sharp decline in Chinese tourists (which have currently recovered by only 40% compared to pre-COVID-19 levels) due to safety concerns and intensified competition in the region. Krungsri Research forecasts that foreign tourist arrivals will fall to 34 million in 2025, down from 35.5 million in 2024, the first annual decline since 2021.
Private consumption is under pressure from multiple factors. While some government policies, such as domestic tourism stimulus measures and more accommodative monetary policy through interest rate cuts, the positive impact may be limited due to structural issues and other restraining factors, including the impact of US import tariffs on employment and household income, declining farm income due to low agricultural product prices, high household debt, and sluggish consumer confidence. Amid domestic political uncertainty, consumption growth is likely to be low for the remainder of the year.
Regarding the policy interest rate, the Monetary Policy Committee (MPC) is expected to cut the policy interest rate one or two more times within the first quarter of 2026, from the current 1.50% per year, to support economic recovery and alleviate tight financial conditions. Meanwhile, the average headline inflation rate in 2025 is expected to be low at just 0.2%, well below the target range of 1-3%, which could pave the way for the MPC to lower the policy interest rate.
Dr. Pimnara Hirankasi, Head of Economic Research and Head of Research at Bank of Ayudhya Public Company Limited, stated that the overall Thai economy in the second half of 2025 is likely to face risks and high volatility from both external factors, particularly US import tariffs and the fallout from the Thailand-US trade agreement. Specifically, the issue of transshipment tariffs and the proposed 0% tariff on US imports poses a risk of twin influx, or an influx of US goods that will exacerbate the influx of Chinese goods into Thailand. Furthermore, there are risks posed by the domestic political situation, which remains fragile. Under the baseline scenario, the impact on the economy for the remainder of the year is expected to be limited. In a worst-case scenario, if political developments impact the continuity and effectiveness of economic policy implementation, including trade negotiations with major countries, the Thai economy could lose its recovery momentum and face the risk of lower-than-expected growth .