IMF Lowers Thailand’s 2025 Growth Projection to 1.8%, Highlights Four Major Economic Risks

The International Monetary Fund (IMF) has revised Thailand’s economic growth forecast for 2025 downward to 1.8%, lowering it from an earlier projection of over 2%. The downward revision reflects concerns over slower-than-expected recovery in key sectors, including tourism and exports, which have been pivotal to Thailand’s economic performance. Additionally, global economic uncertainties and domestic challenges, such as inflationary pressures, have contributed to the IMF’s more cautious outlook.

Key takeaways

• The IMF has cut Thailand’s 2025 GDP growth forecast to 1.8% due to rising global trade tensions and structural weaknesses.
• Four key traps, U.S. tariffs, reliance on tourism, high household debt, and underinvestment, are constraining Thailand’s economic momentum.
• The IMF recommends trade diversification, structural reforms, and boosting productivity to mitigate long-term vulnerabilities.

The adjustment reflects the impact of four structural challenges that continue to constrain the country’s economic momentum.

Global economic uncertainty, driven in part by heightened U.S. trade protectionism, has intensified pressures on export-driven economies like Thailand. 

The U.S. is currently enforcing the highest tariff rates in nearly a century, sparking retaliatory actions and escalating trade tensions worldwide. ASEAN economies, which derive approximately half of their GDP from exports, face average tariffs of up to 30%. 

Thailand’s exports to the United States account for roughly 12% to 15% of its total exports, exposing it to significant external risk. Thailand’s reliance on the U.S. market means that fluctuations in American demand or changes in trade policies could have a notable impact on the country’s overall economic stability. Diversifying export markets and reducing dependence on any single trading partner could be key strategies for mitigating such risks.

In parallel, the IMF has reduced its growth forecast for the ASEAN region, projecting an expansion of 4.1% in 2025, down from 4.8% in 2024, with a further decline to 3.9% expected in 2026. These adjustments represent downward revisions of 0.6 and 0.7 percentage points respectively.

The IMF attributes the weaker outlook to five primary factors: the direct effects of increased tariffs, diminished exports to third countries impacted by those tariffs, heightened uncertainty undermining investment and domestic demand, tightening credit conditions that restrict financing and foreign direct investment, and falling commodity prices resulting from the global economic slowdown.

Although a 90-day suspension of additional U.S. tariffs was announced on April 2, existing high tariff levels between China and the United States persist, continuing to weigh on regional economies.

IMF highlights four key structural weaknesses hindering economic growth

For Thailand specifically, the IMF identifies four critical structural weaknesses impeding growth:

1. The adverse impact of U.S. tariffs, which has contributed directly to the lowered growth projection.
   
2. A heavy reliance on tourism, which leaves the economy vulnerable to global shocks and has slowed post-pandemic recovery relative to other nations.
   
3. High household debt levels, which constrain domestic consumption and dampen internal demand.
   
4. Long-term structural issues, including underinvestment in human and physical capital, coupled with an aging population that is eroding labor force participation and productivity growth.
   

To address these challenges, the IMF recommends a comprehensive set of policy measures. 

These include resolving trade tensions through compromise agreements, diversifying trade partnerships and increasing intra-ASEAN trade, and adjusting monetary policy by lowering interest rates when conditions permit. 

The IMF also advises maintaining exchange rate flexibility to absorb external shocks, providing targeted fiscal support to vulnerable sectors and households, and implementing structural reforms aimed at enhancing productivity.

Key reform areas include increased investment in human capital, infrastructure development, reducing barriers to foreign direct investment, improving governance, and strengthening social safety nets.

The IMF emphasizes the importance for Thailand of shifting from its traditional dependence on tourism and low-value exports toward upgrading its existing industries. 

Potential avenues include advancing medical and wellness tourism, expanding high value-added financial services, and producing next-generation vehicles and other advanced manufacturing goods.