Domestic spending in late 2024 showed a clear slowdown, reflecting the diminishing positive impact of the government’s THB 10,000 cash handouts to around 14 million vulnerable people, which began in late September last year.
Key Takeaways
- The Thai government’s measures to stimulate spending, such as tax deductions and cash transfers, are expected to provide short-term support for private consumption amidst slow recovery and high household debts.
- The Thai economy experienced a slowdown in domestic spending, with private consumption, non-durable goods spending, and private investment all showing negative growth, while exports and tourism experienced mixed results.
- In China, despite challenges from excess supply and weak consumption, government stimulus measures and plans for extending trade-in programs are expected to improve consumption and investment, mitigating potential impacts from worsening trade tensions.
In 1Q25, the government introduced measures to stimulate spending, including personal income tax deductions under the Easy-E-Receipt program (up to THB 50,000 per person), effective from January 16 to February 28. Additionally, the government plans to transfer THB 10,000 to approximately 4 million elderly individuals registered through a government application, with the disbursement expected by late January.
These measures are anticipated to provide short-term support for private consumption amidst a slow recovery in consumer confidence and a high level of household debts. For 2025, Krungsri Research expected private consumption growth to decelerate to 3.0% from an estimated 4.8% in 2024.
Economic indicators showed a deceleration in domestic spending in November. The Bank of Thailand (BOT) reported that the economy slowed down in December, with private consumption down -0.4% MoM sa following the lift given by government’s cash handouts a month earlier.
This slowdown particularly affected spending on non-durable goods. Also, private investment contracted by -1.8%, led by lower investment in construction and plant & machinery. However, seasonally adjusted exports (excluding gold) expanded by 3.0%, driven primarily by exports of automobile and processed agricultural products. Meanwhile, the tourism sector saw an increase in the number of international visitors from India, Japan, and China, but overall tourism revenue was affected by a decline in Russian tourists who spent a lot.
Investment is still struggling with a slow recovery in overall confidence and challenges from the Global Minimum Tax enforced earlier this year. Data from the BOT showed that the Business Sentiment Index (BSI) slipped from 49.3 in November to 48.4 in December and fell below 50 for 15 consecutive months. This was largely due to a declining confidence in the manufacturing sector, which has been in the contractionary zone since mid-2024. Meanwhile, the confidence in the non-manufacturing sector has been lifted above 50 points largely due to a recovery in the tourism sector.
The prolonged period of business confidence below 50 reflects ongoing uncertainty among businesses, especially in manufacturing, which faces structural challenges such as declining competitiveness. As a result, private investment in the past year has been underwhelming.
This year, we expected private investment to expand by 2.9% due to:
(i) an uptick in government spending, especially with regard to the 26.5% increase in the capital budget for fiscal year 2025, which will then help induce related private-sector investments;
(ii) investment promotion applications to the Board of Investment (BOI) in the first nine months of 2024 totaled over THB 720 bn, the highest in a decade; and
(iii) the recent data from the Eastern Economic Corridor (EEC) indicates that 12 investors, with a combined investment value of over THB 150 bn, are planning to invest in Thailand this year, mainly in sectors related to data centers and semiconductors. However, at the beginning of 2025, the Thai government implemented the Global Minimum Tax (GMT), a minimum tax rate of 15% for multinational enterprises (MNEs), with consolidated annual revenues of at least EUR 750 million, effective from accounting periods starting on or after January 1, 2025. The measure may prompt multinational corporations to reassess their investment decisions. This also pose a challenge for the country that has relied on low tax rates to attract foreign investment.
China
A new round of stimulus measures is expected to help support the economy, but China continues to face challenges from both internal and external risks. The official and Caixin PMIs showed the manufacturing slowing in December, despite growing new orders. The non-manufacturing PMIs continued to expand. Headline inflation remained low in December at just 0.1% YoY, its weakest in 9 months, while producer inflation slightly improved from -2.5% to -2.3%. Meanwhile, new home sales by the top 100 developers began to stabilize at 0% YoY in December, compared to -6.9% in November.
China is still struggling with excess supply and weak consumption. However, government stimulus measures have helped ease these challenges and provided some economic support, especially the trade-in program for electrical appliances and cars. In 2025, the government plans to extend this program to include smartphones and tablets, kitchen appliances, renewable energy cars, and air conditioners. In addition, the central bank announced soft loans for businesses to upgrade their machinery and equipment. These measures are expected to improve consumption and investment in 1H25 and mitigate the impacts of potentially worsening trade tensions in 2025.
As global economies navigate a complex landscape, the US and Eurozone markets may face slower-than-anticipated growth. Recent data suggests that rising interest rates and persistent inflationary pressures could hamper consumer spending and business investment. Analysts warn that despite robust labor markets, geopolitical tensions and energy price fluctuations present significant headwinds for economic expansion across these regions.
In contrast, China is gearing up for potential stimulus measures aimed at mitigating risks associated with a looming trade war, particularly with the United States. The Chinese government is reportedly considering fiscal policies and infrastructure projects to bolster domestic demand and stabilize growth. Economic indicators reveal slowing growth in China, prompting concerns over its ability to maintain momentum amid increasing global uncertainties.
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