The deteriorating competitiveness of Thai automotive companies coupled with contracting loan growth and uncertainty regarding US president-elect Donald Trump's trade policies pose threats to the Thai economy next year, say economists who downgraded the nation's GDP growth outlook.
Pipat Luengnaruemitcha, managing director and chief economist at Kiatnakin Phatra Financial Group (KKP), said the contribution from the manufacturing industry decreased following the pandemic, with the automotive, electronics and petrochemical sectors losing competitiveness.
The auto industry faces growing competition in the electric vehicle segment, while other sectors have been slow to adapt to fast-changing manufacturing technology, he said.
"Recent official data indicate domestic consumption has been surging, but vehicle production decreased, meaning some domestic demand is served by growing imports," said Mr Pipat.
"While exports grow, local production declines, indicating domestic value added is low."
Meanwhile, the banking industry reported the first contraction of system loan growth, which will pressure domestic consumption going forward, he said.
In addition, the tax policies of Trump could increase tariffs for countries with a high trade surplus with the US.
Thailand ranks second in Southeast Asia after Vietnam in terms of trade surplus with the US, with the figure doubling over the past three years, said Mr Pipat.
"These are the main reasons we downgraded our GDP growth estimate for 2025 to 2.6%," he told a forum hosted by Money & Banking magazine.
KKP cut its outlook for Thai growth next year from 3% to 2.6%, and projected expansion of 2.4% in 2026.
Thailand's ageing population also pressures GDP growth prospects as the labour supply decreases, noted the brokerage.
"Without an increase in labour productivity, GDP is on course to fall to 2-2.5% by the end of the decade," Mr Pipat said.
Speaking at the same event, Asadej Kongsiri, president of the Stock Exchange of Thailand (SET), said Thai businesses need to adjust to uncertainty, particularly the trade policies of the new US administration.
From the first Trump administration to the current Joe Biden administration, US$130 billion worth of investment relocated out of China to other Asian countries, with Thailand only capturing 10% of that amount, said Mr Asadej.
Over the past three years, the SET index dropped by 23% from 1,700 points, while the Indian stock market increased 16.5%.
To promote the sustainable growth of Thailand's capital market, the new SET president outlined three key strategies.
The first is enabling ambitious growth, partly by promoting Thailand as a healthcare hub and drawing international initial public offerings.
Second, the bourse aims for inclusive growth, while the final strategy is developing and upskilling staff by enhancing their financial literacy, he said.