As several countries seek trade negotiations with the US during the 90-day pause on tariffs, Thailand's slow progress has sparked concerns over potential economic repercussions.
Fears of a recession have resurfaced, especially as the other economic engine of tourism faces a tough test with purchasing power dipping in the Chinese market.
ALMOST HOPELESS
New measures to lift the Thai economy during a recession may be limited, and the downturn could start as early as the second quarter this year, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI).
Many countries are likely to face a recession if US President Donald Trump's tariffs are implemented, and Thailand has few cures for its economic ills, he said, meaning Thai GDP could grow slowly this year.
"I rarely see new economic tools boost the economy," said Mr Kriengkrai.
An earlier proposal for Thailand to seek new markets is a good concept if exports to the US drop as a result of new tariffs, but other countries will be competing with Thailand in these new markets if the tariffs affect them, he said.
Many countries have cost advantages over Thailand in terms of production, electricity and labour, said Mr Kriengkrai. It is not easy for Thailand to drive up GDP by relying mainly on exports to new markets, he said.
"Don't forget China was among the first countries to seek new markets when former US president Joe Biden passed trade sanctions on certain Chinese products," said Mr Kriengkrai.
"Chinese companies exported more products to Southeast Asia after their shipments to the US declined. China continues to have a trade surplus with Asean."
The Southeast Asian market, with a population of roughly 700 million, has become a main target for exporting countries. Thailand also wants to focus on this region, but has key rivals such as Vietnam also affected by steep Trump tariffs.
The FTI recommends the government push for more free trade agreements, encourage the development of unique products, and use more locally made products for state procurement projects.
"We believe a recession will happen worldwide, including in the US. Some analysts previously predicted Thai GDP would grow by 3% this year," he said.
"That figure will be difficult and exhausting to reach."
The Joint Standing Committee on Commerce, Industry and Banking said many economic challenges, notably the US's reciprocal tariffs, may cause GDP growth to be lower than its projection of 2.4-2.9%.
MONETARY AND FISCAL EASING
Anusorn Tamajai, dean of the economics faculty at the University of the Thai Chamber of Commerce, said the likelihood of Thailand entering a recession in the second half of the year depends on the impact of the trade war, which remains highly uncertain.
Two major factors are the economic slowdowns in China and the US, Thailand's two primary export markets, which could stunt Thai exports, he said. In the worst case, exports may contract, said Mr Anusorn.
If tourism revenue does not meet expectations in the second half of the year, coupled with declines in production, investment and consumption, the economic impacts could be serious, he said.
Moreover, the stability of domestic politics adds another layer of risk that could influence the country's economic performance, said Mr Anusorn.
Taking all these factors into account, Thailand may post growth of less than 2% this year, but he said he can't definitively predict whether deflation will occur.
Mr Anusorn said the government should focus on implementing both monetary and fiscal easing policies.
"The cash handout scheme needs to be re-evaluated," he said.
"The budget should focus on investing in infrastructure projects, which could lead to significant job creation and enhance the country's long-term competitiveness."
Priorities should include improving water management systems, developing human capital, and promoting advancements in research and innovation, said Mr Anusorn.
POSSIBLE RECESSION
Nattaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said the possibility of a Thai technical recession is imminent, particularly in the second half of this year.
Even before the March 28 earthquake, the think tank estimated first-quarter Thai GDP expansion of less than 3% year-on-year, mainly attributed to slowing tourism growth.
"Before the US announced the reciprocal tariffs in early April, K-Research projected low quarter-on-quarter growth for Thai GDP in the first quarter. We now project quarter-on-quarter growth to be flat in the third quarter, then contract in the fourth quarter," she told the Bangkok Post.
Without a clear time frame for Thailand's trade negotiations with the US, the country's exports to the US could be subject to a 36% reciprocal tariff starting in early July.
"Thailand will be in serious trouble if Thai exporters have to pay for 36% US tariff, but other countries pay only 10%," said Ms Nattaporn.
"As we cannot predict the effectiveness of Thai-US trade talks, K-Research has maintained our outlook for Thai GDP growth at 1.4%, which is already quite low."
Asia Plus Securities (ASPS) said the renewed trade war is escalating because of US tariffs, raising concerns about a worldwide recession.
Thailand's economy in the first quarter was supported by stimulus measures, including the Easy E-Receipt and 10,000-baht cash handout to 3 million elderly people. However, the Thai economy will face more challenges starting from the second quarter, noted the brokerage.
The US imposed a 10% base tariff on Thailand starting April 9, with a 36% reciprocal tariff starting July 9 if negotiations fail to reach a compromise.
"International trade will be inevitably affected. Thailand's net exports may fall from 5% of 2024 GDP to possibly 0%, with its trade surplus with the US of US$35 billion decreasing," ASPS said in a research note.
"If Thailand has zero trade surplus with the US, Thailand's GDP is projected to decrease 4%."
World trade volume may decline due to lower demand, affecting Thailand's manufacturing sector.
"Every 1% decrease in Thailand's industrial production could lower Thai GDP by 0.25%," the brokerage noted.
Bloomberg estimated Thai first-quarter GDP growth of 3% year-on-year. The Bank of Thailand is expected to cut the policy interest rate by 25 basis points at its meeting on Wednesday to support the economy.
"GDP may beat forecasts for the first quarter, then plummet for the rest of 2025, meaning Thailand could fall into a technical recession," said ASPS.
LIMITED DURATION
Nonarit Bisonyabut, a senior research fellow at Thailand Development Research Institute, said the next three months will be a period of global economic uncertainty due to the negative effects of Trump's tariff measures.
As a result, the Thai economy may grow by less than 2% this year, he said.
"Trump's range of import tariffs for Thailand spans from 10% to 36%, making it difficult to assess the full impact," said Mr Nonarit.
"However, the tariffs are expected to limit Thai economic growth to less than 2% this year."
The more concerning condition would be if the Thai economy moves into negative territory, he said.
If Thailand's economy is adversely affected by Trump's tariffs, people should monitor whether the Bank of Thailand will use policy interest rate cuts to help mitigate the economic impact, and whether the government will introduce any stimulus packages or structural reforms, said Mr Nonarit.
"Uncertainty will reign over the next three months, as we don't know the final tariff rates or which countries will be affected," he said.
"Exports and tourism are the two key engines of the Thai economy. With both under pressure, the economy might not reach 2% growth this year."
The Fiscal Policy Office (FPO) is scheduled to review its Thai economic growth forecast today.
In its previous forecast made in January, the FPO projected an average growth rate of 3% for this year, within a range of 2.5-3.5%.
The office identified four positive factors supporting the Thai economy: private consumption, exports, tourism, and public and private investment.
Private consumption was expected to grow steadily at 3.3% annually, supported by government stimulus measures and increased income for farmers.
Export value was projected to grow by 4.4% this year, in line with rising global demand and improved economic conditions in trading partner countries, noted the FPO.
Tourism was expected to continue expanding, with foreign arrivals projected to increase to 38.5 million, contributing revenue and supporting both the service and manufacturing sectors.
WIDESPREAD IMPACT
Somchai Sittichaisrichart, managing director of SiS Distribution, said Thailand could enter a recession if the country fails to negotiate with the US on the reciprocal tariffs.
This failure could lead to layoffs in Thailand's manufacturing and agriculture sectors, he said.
In addition, the local tourism sector will decline due to a global economic downturn, said Mr Somchai.
For the technology sector, SiS expects companies to continue spending on cloud services on a pay-per-use model, while adopting artificial intelligence (AI)-powered devices that can reduce costs, improve efficiency, and enhance productivity.
"We see the finance, banking and insurance sectors as well as China-based automotive firms still having purchasing power for IT products," he said.
Suthida Mongkolsuthi, chief executive of IT product distributor Synnex (Thailand), said the Thai economy may avoid a recession if the US and global economies face a downturn.
"We will focus on selling products to customers who can afford them, adopting a more cautious approach and maintaining low inventory," said Ms Suthida.
The company is ordering more in advance now to meet customer demand, particularly for products it believes may increase in price after US reciprocal tariffs come into effect, she said.
Synnex still sees opportunities in the consumer market, which it believes has already passed its low point, said Ms Suthida.
Premium users continue to require new gear, such as the new gaming system Nintendo Switch 2, which is expected to have strong sales, she said. The market outlook is not as dire as in 2019.
"We will not revise our growth projection this year as we set a conservative target that factored in an unfavourable economy," said Ms Suthida.
BRACE YOURSELF
Kessara Thanyalakpark, managing director of SET-listed Sena Development, said the residential market faces major challenges this year, starting with the earthquake last month followed by the US's reciprocal tariffs.
"The market experienced two major shocks. The first was the earthquake that shook buyer confidence in the condo sector, which was a heavy blow to sentiment," she said.
"Just as we were bracing for a short-term slowdown in condo transfers and sales, the renewed trade war began. Its impact on sentiment and purchasing power may be even more severe."
Ms Kessara said the reciprocal tariff was more damaging than the earthquake because it affects the global economy.
She said it is difficult to predict how homebuying sentiment and the domestic economy will be affected if the 36% tariff hike is enacted given the likely widespread impact.
"Sena constantly runs stress tests to see how far the company can withstand pressure," said Ms Kessara.
"If we hit our limits, we'll need to adapt and change our risk management direction."
The second quarter of this year might be the most stressful for residential developers as some have bond repayments due and recent events have made it difficult for firms planning to issue new debentures or seal major deals, she said.
Thanet Supornsahasrungsi, president of the Association of Chonburi Tourism Federation, said the tourism industry is also bracing for the impact of the tariff hike, though it should have less of an impact than in other sectors.
He said the weak global economy could hinder spending from both domestic and foreign travellers.
For domestic tourism, operators are focusing on the premium market to earn income, but the majority of small and medium-sized tourism businesses are still struggling, said Mr Thanet.
He said foreign tourists interested in value travel are already overlooking Thailand for cheaper destinations such as Vietnam, while those with ample budget opt for premium destinations such as Japan, which has a strong reputation in safety.
Hotel operators could see their operational costs indirectly spike by price volatility if imported goods and food supplies become more expensive as a result of the trade war, said Mr Thanet.
He said Thailand should prioritise practical efforts to attract more tourists, and not limit itself to creating new events.
Purchasing power is expected to be stagnant if the Thai government fails to negotiate a lower US reciprocal tariff. Bangkok Post file photo