# SCB EIC predicts an additional rate cut in December, reducing it to 1.25%

- Link: https://www.thailand-business-news.com/banking/251997-scb-eic-predicts-an-additional-rate-cut-in-december-reducing-it-to-1-25
- Published: 2025-10-24T00:28:00+07:00
- Author: Economic Intelligence Center Siam Commercial Bank

The Monetary Policy Committee (MPC) decided to maintain the policy rate at 1.50%,
emphasizing an accommodative stance and acknowledging limited policy flexibility.
Economic growth in Thailand has slowed due to tariff impacts, prompting a downward
revision of the inflation forecast. Financial conditions remain challenging, particularly
for SMEs. The MPC’s decision was not unanimous, with a 5-2 vote in favor of holding
the rate, while two members advocated for a reduction to 1.25%.

The economy in Q3 is anticipated to decelerate, primarily impacted by the export
sector, which is now feeling the effects of U.S. tariff measures. Additionally, 
industrial production has softened due to temporary disruptions. The MPC forecasts
Thai GDP growth for the second half of 2025 to fall below 2% year-on-year.

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**· The MPC revised up its export growth forecast for this year significantly to
10%YoY (from 4.0%YoY in the June meeting), in line with actual data.** However, 
the positive impact on the overall economy is limited, as the import growth forecast
was also raised substantially to 10.2%YoY (from 5.3%YoY in the June meeting).

**· The MPC assessed that the tourism sector and domestic demand have already slowed.**
Accordingly, it revised down its projection for foreign tourist arrivals in 2025
from 35 million in the June meeting to 33 million (Figure 1) and lowered its forecast
for domestic demand growth from 2.1%YoY to 1.7%YoY. Nevertheless, the MPC expects
both drivers to gradually improve going forward and has already incorporated the
government’s new economic stimulus measures, scheduled for implementation in Q4,
into this economic projection.

**· The overall outlook for the Thai economy remains broadly unchanged from the 
June meeting.** The MPC slightly revised down its GDP growth projections from 2.3%
YoY and 1.7%YoY in the June meeting to 2.2%YoY and 1.6%YoY in 2025 and 2026, respectively.

## MPC Decision and Economic Growth Outlook

The Monetary Policy Committee (MPC) voted 5 to 2 to keep the policy rate at 1.50%,
with two members favoring a reduction to 1.25%. The majority views the current policy
as accommodative, stressing careful timing due to limited room for further easing.
The economy is expected to slow in the second half of 2025, mainly due to the export
sector feeling the impact of U.S. tariffs and weaker industrial production. GDP 
growth projections were slightly revised down to 2.2% for 2025 and 1.6% for 2026.
Domestic demand and tourism are slowing, with foreign tourist arrivals forecast 
reduced to 33 million for 2025.

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## Inflation and Deflation Risks

The MPC lowered its inflation forecast to 0% for this year, with expectations for
inflation to remain below the target range through 2026. Headline inflation is projected
to decline to 0.0% in 2025 and rise slightly to 0.5% in 2026 due to lower energy
and raw food prices. Despite concerns, the committee does not consider Thailand 
in deflation, citing stable core inflation, stable product prices, and long-term
inflation expectations remaining within range.

## Financial Conditions and SME Impact

Financial conditions in Thailand remain tight, with overall credit contracting slightly
amid weak demand. SMEs face particular challenges, with loan contraction and deteriorating
credit quality, including higher non-performing loans. Export-oriented SMEs are 
hurt by the strong baht and low profit margins, especially as most do not hedge 
currency risks. The MPC emphasized maintaining accommodative monetary policy while
carefully managing timing and effectiveness under limited space and heightened uncertainties.

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