Thailand’s economy faces a challenging second half of 2025 due to uncertainty about threatened US tariffs, says a Bank of Thailand deputy governor, just as the country is caught in a new wave of domestic political turmoil.
Under these circumstances, monetary policy should remain at an accommodative level to support the economy, said Roong Mallikamas, deputy governor for financial institutions stability and one of the two candidates short-listed to lead the central bank from October.
“We’ll see a tailing off of economic growth in the second half of this year mainly due to the tariff effects,” Ms Roong told Reuters in an interview. “We do anticipate a marked slowdown in economic activities.
“I think basically the tariff effects also magnify … our country’s structural problems.”
Southeast Asia’s second largest economy has lagged regional peers since the pandemic, growing only 2.5% last year and forecast to expand by 2.3% in 2025, bogged down by high levels of household debt and tepid consumption.
After rate cuts in October, February and April, the central bank's Monetary Policy Committee (MPC) last week left its key interest rate unchanged at 1.75%.
“I think the pause was just to say that this is to assess what we have already taken,” Ms Roong said. “Another issue is how to maximise the remaining policy space that we have.
“If the outlook deteriorates, if I were an MPC member, I would not be reluctant to ease,” she said.
The next policy rate review will be held on on Aug 13.
Thailand faces renewed political chaos after Prime Minister Paetongtarn Shinawatra was suspended from office by the Constitutional Court on Tuesday.
Close watch on baht
A softer baht would also support the economy, and the central bank would look to ensure that the currency’s moves are not affected by non-fundamental factors, such as gold prices, she said. The baht has risen by 5.7% against the US dollar so far this year.
While recent negative inflation readings did not signal the economy was in deflation, they are a “reflection of very soft demand and it’s more of a concern that the momentum of the economy is rather slow”, Ms Roong said.
Ms Roong, who holds a PhD in economics from the Massachusetts Institute of Technology, is contending along with Government Savings Bank president Vitai Ratanakorn to succeed BoT governor Sethaput Suthiwartnarueput, who will retire on Sept 30.
Finance Minister Pichai Chunhavajira, who is currently in the US for trade talks, is expected to make the final selection soon and propose the choice to the cabinet for approval.
The governing Pheu Thai party, which took power in 2023, has long been at loggerheads over rate cuts and the currency with the central bank.
Ms Roong, 56, said there was a need for the central bank to communicate and collaborate more deeply with the government.
“When you talk early, a lot of things can be resolved before it gets to the point where it’s more confrontational,” said the 30-year BoT veteran.
“I would hope to divert a lot of confrontations.”
Facing down concerns over assertive governments pushing the central bank to toe their line, Ms Roong underlined the need for open dialogue.
“You can voice your concerns, and you can share freely what you think. I think that is independence,” she said.
“It’s not about going separate ways.”