World Bank lowers Thailand’s economic growth forecast to 1.8%

The World Bank has significantly lowered its forecast for Thailand’s economic growth, projecting an expansion of just 1.8% for 2025 and 1.7% for 2026. This represents a sharp decrease from the earlier projections of 2.9% and 2.7%, respectively. Thailand’s economy grew by 2.5% last year, underperforming many of its Asian counterparts.

The revised outlook is attributed to a combination of weakening exports and tourism, particularly a decline in visitors from China, coupled with subdued domestic demand. The tourism sector’s recovery is proving slower than anticipated, with foreign arrivals expected to remain largely unchanged this year and only return to pre-pandemic levels by mid-2026.

Further complicating the economic landscape are domestic political uncertainties. Potential delays in the 2026 fiscal budget and public infrastructure investments, stemming from political instability, could negatively impact private investment and overall growth. The recent suspension of Prime Minister Paetongtarn Shinawatra from her duties pending an ethics investigation adds to this uncertainty.

In light of these challenges, the World Bank suggests that the Bank of Thailand has room to further reduce interest rates to stimulate the economy. The central bank has already cut rates by 75 basis points since October to 1.75% and has indicated a willingness for further easing amidst falling inflation and rising uncertainties.

Despite the headwinds, the World Bank notes that growth could reach 2.2% this year if trade tensions de-escalate and private investment sees moderate growth. Domestically, effective fiscal stimulus and high-quality infrastructure investment are seen as crucial support mechanisms.

The report also highlights the potential of digital technology to drive growth, create jobs, improve services, and boost productivity in Thailand. The nation’s digital economy, currently contributing about 6% of GDP, is a significant and growing sector, particularly in financial services, digital payments, fintech, and software industries.

Source : Thailand Economic Monitor