Is Thailand’s growth engine stalling?

Thailand’s economic growth is losing momentum as its key sectors—tourism, exports, and manufacturing—face significant challenges. Last week, the World Bank revised its 2025 GDP growth forecast for Thailand, lowering it by 1.1% to a modest 1.8%, attributing the downgrade to weaker economic conditions and global uncertainties.

The World Bank’s Global Economic Prospects highlights that global uncertainties are set to impact Thailand’s economic growth, mirroring challenges faced by other emerging markets and developing economies (EMDEs).

Tourism, which contributed approximately 20% to Thailand’s GDP before COVID-19, has been a fundamental pillar of the country’s economy. Although the sector is on the mend it still falls short of the 2019 peak of 39.8 million visitors. The industry was expected to return to pre-pandemic levels by mid-2025, however, a decline in Chinese tourists and global economic uncertainties present challenges. Tourism remains a crucial economic driver but has not yet fully regained its previous momentum.

Exports and Manufacturing: Exports, particularly in electronics and automotive sectors, have shown resilience, with a 12.3% year-on-year increase in Q1 2025. However, export-oriented production like motor vehicles and electronic components has contracted, and global trade tensions, including U.S. tariff policies, could dampen growth.

The manufacturing sector faced a contraction in Q1 2025, signaling vulnerabilities. If trade tensions intensify, GDP growth could drop to 1.8% in 2025 under a high-tariff scenario, compared to 2.5% with lower tariffs.

Excessive household debt restricts consumer spending.

Domestic Consumption and Investment: Private consumption has been a bright spot, growing 6.3% in 2022 and 5.4% in Q1 2023, but it slowed to 2.6% by Q1 2025, reflecting weakening domestic demand. Private investment has also been lackluster, declining 0.9% in Q1 2025 for the fourth consecutive quarter.

High household debt—nearly 87% of GDP—constrains consumption, with 40% of households holding high-interest informal loans, limiting financial flexibility. Public investment and government consumption have also contracted, further hampering growth.

Structural Challenges: Thailand’s economy grew at an average of 7.5% annually from 1960 to 1996, but growth has slowed significantly, averaging 1.9% from 2013 to 2023. Structural issues like low productivity, an aging population, and high income inequality are stalling progress. The “middle-income trap” is a growing concern, with analysts noting

Thailand’s lag behind ASEAN peers like Vietnam, Indonesia, and the Philippines, which posted 4.3–5.8% growth in 2023 compared to Thailand’s 1.9%. The World Bank projects growth of 2.9% in 2025, but without reforms to boost innovation, SME productivity, and education, long-term potential could decline to 2.7% by 2030.

Policy and Political Context: Political instability, marked by 13 coups since 1932, continues to erode investor confidence. The current government’s fiscal stimulus, including cash handouts, aims to boost consumption but risks increasing the fiscal deficit to 3.6% of GDP in 2025. The Bank of Thailand’s cautious monetary policy, maintaining a 2.25% rate, reflects concerns about financial stability amid high household debt. Reports on social media highlight growing public pessimism, with some claiming Thailand has “lost its last engine of growth” and citizens are “abandoning hope for a decent life.”

Thailand’s economy shows resilience.

Despite challenges, Thailand’s economy shows resilience. The World Bank notes progress in poverty reduction (down to 8.2% in 2024) and inequality (1.5 Gini points decline). Tourism and export growth, particularly to the U.S., provide short-term boosts. The Eastern Economic Corridor (EEC) and “Thailand 4.0” initiatives aim to attract high-tech investment, though execution remains uneven. Secondary cities like Chiang Mai and Chon Buri are showing faster per capita GDP growth than Bangkok, suggesting potential for diversified economic engines.

Thailand’s growth engine hasn’t stopped, but it’s sputtering due to structural weaknesses, high debt, and external risks. Tourism and exports are still key drivers, but their momentum is fragile. Without aggressive reforms to enhance productivity, education, and innovation, Thailand risks falling further behind its ASEAN peers. The sentiment on expers comments reflects growing frustration, but projections of 2.2% –2.5% growth in 2025 suggest the economy retains some fuel—if policymakers can ignite it effectively.