Bangkok Bank (BBL) anticipates that ongoing domestic political instability will further delay investment decisions, compounding the impact of US tariffs on Thai exports.
According to Kobsak Pootrakool, senior executive vice-president at BBL, the prevailing political uncertainty could postpone investment decisions across both the public and private sectors. At the same time, many businesses are holding off on investment until there is greater clarity regarding US tariff policies on Thai exports and the outcome of the Thai government's trade negotiations with the United States.
"Political developments in Thailand are generally difficult to predict," Mr Kobsak noted. "As such, the bank is closely monitoring the situation and assessing the potential implications for the Thai economy. Nevertheless, external uncertainties, particularly those arising from US trade policies, remain a major challenge to the country's growth prospects this year, especially given Thailand's existing structural issues."
In response to these headwinds, BBL has slashed its 2025 Thai GDP growth forecast to 2%, from 3%, based on the assumption that the US will impose reciprocal tariffs on Thai exports in the range of 10-15%. In a worst-case scenario, if risks materialise further, GDP growth could fall to 1.5%, primarily due to the impact of the tariffs, Mr Kobsak said.
He added that although Thai exports appeared robust in the first half of the year, this strength was largely driven by front-loading from buyers concerned about impending tariffs, and the export outlook beyond the early months remains highly uncertain.
Export challenges are expected to intensify in the second half of the year. US importers may reduce their orders after stockpiling, while heightened trade tensions and potential tariff hikes could add further strain.
In addition, should Chinese goods be redirected to other markets due to trade negotiations, Thai products may face increased competition in those regions, Mr Kobsak said.
Meanwhile, he said the tourism sector is also facing headwinds thanks to an ongoing decline in the number of Chinese arrivals.
In the first five months of 2025, international tourist arrivals dropped by 2-3% year-on-year, leading the bank to project total international tourist arrivals to tally around 35.5 million this year.
"The decline in foreign tourists, particularly from China, has been driven by security concerns and the recent earthquake in Bangkok," Mr Kobsak said. "Typically, Thailand takes around four to five months to recover from such negative events."
However, he added that the bank will be monitoring the tourism sector in the final quarter of the year. Should the government introduce new measures to attract international visitors, the sector may still see an improvement before year-end, he noted.
In terms of monetary policy, Mr Kobsak expects the Bank of Thailand to cut its policy rate twice this year, lowering it from the current 1.75% to 1.25% in a bid to support the economy amid rising uncertainties. Additionally, the baht is projected to appreciate against the US dollar by the end of the year, in line with a weakening greenback.