Thai Economic Growth to Be Impacted by US Tariffs, Central Bank Reports

Thailand’s economic growth is anticipated to be affected by US tariffs on exports, but not as significantly as it was during the Covid-19 pandemic, according to Sakkapop Panyanukul, assistant governor of the Bank of Thailand.

Key Points

• Economic Impact: US tariffs will slow Thailand’s growth below 2.5% in 2024, affecting exports and manufacturing. The full impact will emerge in H2 2024, but it won’t be as severe as the Covid-19 pandemic.
• Trade Uncertainty: Thailand faces a potential 36% tariff if negotiations fail by July. Global trade policy shifts are a prolonged shock, delaying investments and halting some production.
• Monetary Policy: Inflation may dip due to supply factors, but no immediate pressure exists for further rate cuts. The central bank will review forecasts on April 30 after February’s 25-basis-point reduction.

Tariffs have disrupted production and delayed investments, with significant effects expected in the second half of the year. Thailand, one of the hardest-hit Southeast Asian countries, could face a 36% tariff if negotiations fail before the global moratorium ends in July. Economic growth might drop below 2.5% this year due to increased US imports impacting local manufacturing. While the GDP decrease is uncertain, it is expected to be less severe than the impact of Covid.

The Thai government is actively seeking solutions to mitigate these challenges, such as exploring new trade partnerships and enhancing domestic production capabilities. Additionally, efforts are being made to diversify export markets, reducing reliance on US imports. The private sector is also adapting by investing in technology and innovation to improve efficiency and competitiveness. Despite these efforts, the economic landscape remains uncertain, with businesses closely monitoring the situation and adjusting their strategies accordingly. Analysts predict that if negotiations succeed, the economy could stabilize and potentially recover in the latter part of the year.

Inflation is expected to decrease due to supply-side factors, with no immediate pressure on monetary policy. In February, the central bank reduced the interest rate by 25 basis points to 2.00%, addressing weaker growth prospects and global trade policy risks. Updated economic forecasts will be released at the next rate meeting on April 30.