Bangkok: SCB EIC warns of a weakening Thai economy, with exports beginning to slow and the risk of deflation rising. The SCB sees the “Quick Big Win” policy package as helping to prop up the economy in the short term, but its impact on GDP remains limited.
According to Thai News Agency, SCB EIC forecasts that the Thai economy is likely to experience significantly lower growth, with a risk of less than 1% growth throughout the second half of the year and the first half of next year. Exports are showing clear signs of slowing down following the US’s retaliatory tariffs. Exports are likely to contract significantly for the remainder of this year and into 2026. Although August exports still grew by 5.8%, this is largely attributed to specific factors, such as electronics and gold. The excluding-specific export figures contracted by around 2%, clearly reflecting the impact of Trump’s tariffs.
Private consumption is a cause for concern due to high household debt amid slow income recovery, shrinking credit, and low consumer confidence. Foreign tourist numbers are gradually recovering, and the government is preparing measures to promote domestic tourism and stimulate Thailand’s key tourist market. The economy needs to monitor risks to financial stability in the coming period, particularly the risk of deflation.
SCB EIC estimates Thai inflation to average near zero this year and next. This year, it is projected to be negative -0.1% and next year at 0.2%, due to falling energy prices and the government’s cost of living measures, as well as weakening domestic demand. The risk of deflation increases due to (1) negative general inflation for six months, which may continue into Q1 2026, (2) the proportion of goods with falling prices continuing to increase to 43% of the inflation basket, and (3) slow recovery in household income, high debt, and weak demand, putting pressure on business profits, investment, and employment.
Regarding the potential for further declines in Thai interest rates, SCB EIC expects the Monetary Policy Committee (MPC) to cut the rate again to 1.25% in December and again to 1% in early 2026 to support the fragile Thai economy. The Quick Big Win policy is focused on supporting the economy, but its additional stimulus is limited. The “Half-Half Plus” program, with a budget of 67 billion baht, is expected to boost consumption in the short term, but its additional positive impact on GDP is limited, as it is allocated from the existing budget and does not increase new loans. Furthermore, spending may not fully contribute to the economy, such as spending on imported goods or participating merchants outside the tax system.
The global economic outlook will begin to be impacted by Trump’s tariffs, while geopolitical and political risks accelerate. The global economy will begin to slow down for the remainder of this year and continue into 2026, supported by accommodative fiscal policy, lower interest rates, and AI investment in many countries. Geopolitical risks are accelerating again, with the US threatening to impose 100% tariffs on China amid intensifying global political tensions. The US government faces a government shutdown and risks a prolonged period. Major central banks continue to ease monetary policy. The Fed is expected to cut interest rates twice more this year, totaling 75 bps, while the ECB will cut rates again to 1.75% later this year, ending this downward trend. The People’s Bank of China (PBOC) will continue easing interest rates into next year.