The state planning unit has slashed its economic growth forecast for this year to 1.8%, down from its earlier projection of 2.8% due to the impact of the global trade war.
The latest revised growth figure already includes the effect of government stimulus measures totalling over 200 billion baht that have been injected into the economy.
Danucha Pichayanan, secretary-general of the National Economic and Social Development Council (NESDC), said on Monday that the economy this year is directly affected by US President Donald Trump’s reciprocal tariffs policy.
The NESDC has modelled three global economic scenarios: base case, high case and low case.
For the base case, the United States imposes a 54% tariff on Chinese imports, and China retaliates with a 34% tariff on US goods.
In this case, global economic growth would be 2.6%, and Thailand’s economy would grow by 1.8%. This scenario is the basis for the NESDC’s current forecast.
In the high case, the US and China significantly reduce tariffs, with the US imposing 30% and China 10%. This would result in 2.8% global growth and 2.2% growth for Thailand.
In the low case, the US sets tariffs at 145% on Chinese goods, and China imposes 146% on US goods. Global economic growth would fall to 2.2%, and Thailand’s growth would slump to 0.5%.
Despite these pressures, Mr Danucha noted that the Thai economy in the first quarter of 2025 expanded by 3.1% year-on-year, continuing from 3.3% in the previous quarter.
After seasonal adjustment, the economy increased by 0.7% from the fourth quarter of 2024.
Exports of goods and services in this year’s first quarter grew by 12.3%, up from 11.5% in the previous quarter. This was due to countries rushing to import goods ahead of the US tariffs.
However, he warned that export and investment sectors will likely slow in the second quarter, with clearer signs of a downturn expected in the third quarter if the situation continues.
According to Mr Danucha, the average 1.8% growth forecast for this year already includes the effect of government stimulus measures, such as the 157 billion baht allocated for economic stimulus, some of which may spill over into next year.
It also includes 66 billion baht in carry-over investment from the previous fiscal year and additional investment funds from the 2025 budget expected to be disbursed later this year.
Mr Danucha noted that while this downturn may not be as severe as the Covid-19 crisis of 2020-21, when economic activities came to a halt, this time economic activities are still ongoing.
However, Thailand’s economy, which has been facing structural problems, such as manufacturing productivity and an ageing population, will take time to resolve and the problems are being compounded by US tariff policies. He warned that the economic impact could last for at least two years.
To mitigate the impact, especially to sustain employment, he said measures similar to those put in place during the Covid-19 pandemic should be used, such as providing liquidity to businesses on the condition that they do not lay off workers.
He also stressed the importance of monetary policy supporting fiscal policy. The Bank of Thailand governor and the finance minister are already discussing this coordination.
“The Thai economy may face a slowdown. Therefore, the private sector is being advised to prepare for global trade volatility. As for the general public, they should be cautious with their spending so we can get through this period together,” Mr Danucha said.
He added that the government must preserve fiscal space to maintain strong public finances, improve revenue collection efficiency and uphold fiscal discipline.
According to Mr Danucha, foreign tourist arrivals are now projected at 37 million, down from the previous forecast of 38 million in February, but still up from 35.5 million last year.
Tourism revenue is expected at 1.71 trillion baht, slightly higher than the previous forecast of 1.69 trillion, due to higher spending per trip.
Dimmer prospects
Stock market analysts suggest that while first-quarter actual GDP is “relatively in line” with market forecasts, there are concerns regarding growth in the three other quarters which is likely to be “dimmer than” the first three months of the year.
“We see a chance that second-quarter GDP will be lower than the first quarter and that of the September quarter will be lower than second-quarter growth. Then final-quarter GDP is expected to be lower than the third quarter,” said Soraphol Veerametheekul, assistant vice-president and head strategist at Kasikorn Securities (KS).
The brokerage anticipates that the economy will expand by only 1.4% this year, he noted.
The projected slower exports and domestic consumption from the second quarter are the main reasons for GDP trending downward for the rest of 2025. Tourism, the key driver of GDP to date, has also begun to stall.
“Most retail executives we talked to view that consumption is likely to slow down significantly from this quarter onwards. We also talked with airline executives and none of them has a positive view of the market for the time being,” he noted.
“There is a likelihood that GDP would contract in the second half of 2025 because all the economic engines tend to be weak looking forward,” said Mr Soraphol. “Only one possible positive news we can think of is once Thailand can convince the US to lower the reciprocal tariff to be imposed on Thai exports.”
Apichart Phubancherdkul, head of strategy research at Tisco Securities, said GDP soared more than the market forecast at 3.1% in the first three months but the NESDC has moved in the same direction with other forecasters in downgrading the growth estimates for the whole of 2025.
Tisco has also revised down this year’s GDP growth to 1.8%, he said.
“The economic outlook is getting more uncertain looking forward in terms of both external and local factors. Consequently, we see limited upside for the Stock Exchange of Thailand index at 1,220-1,230 points,” said Mr Apichart.
The domestic political sitiuation has become a greater concern lately with the case against former premier Thaksin Shinawatra, the de facto leader of the ruling Pheu Thai Party. The verdict is expected to be handed down next month, he added.