Bangkok Bank (BBL) expects continued political instability in Thailand to delay key investment decisions, further compounding the negative impact of U.S. tariffs on Thai exports.
Key takeaways
- Bangkok Bank has downgraded Thailand’s 2025 GDP growth forecast to 2% amid political instability and expected U.S. tariffs.
- Investment decisions are being delayed as businesses await clarity on both domestic politics and U.S., Thailand trade negotiations.
- Exports and tourism face mounting pressure, while interest rate cuts and a stronger baht are expected to help offset some economic strain.
The combination of domestic uncertainty and external trade pressures is creating a challenging environment for economic growth.
The bank believes that both public and private sector investments are likely to be postponed amid ongoing political turbulence.
At the same time, businesses are hesitant to move forward with new projects as they await greater clarity on U.S. tariff policies and the outcome of trade negotiations between Thailand and the United States.
Given these headwinds, BBL has revised its GDP growth forecast for Thailand in 2025 from 3% to 2%. This projection assumes that the U.S. will implement reciprocal tariffs of 10% to 15% on Thai exports.
In a more pessimistic scenario, if external risks intensify, GDP growth could slow further to 1.5%, primarily due to the impact of trade restrictions.
While Thai exports showed resilience in the first half of the year, this performance was largely driven by front-loaded orders from importers concerned about future tariffs.
The outlook for the remainder of the year remains uncertain, as U.S. buyers may scale back purchases after stockpiling earlier in the year. Additionally, increased trade tensions and potential tariff escalations could place further pressure on the export sector.
There are also concerns about intensified competition if Chinese products are redirected to alternative markets, potentially crowding out Thai goods in those regions.
Tourism, another pillar of Thailand’s economy, is also facing challenges. International arrivals fell by 2–3% year-on-year during the first five months of 2025, with the number of Chinese visitors particularly affected. BBL projects total international arrivals to reach around 35.5 million this year.
The decline in tourists has been linked to safety concerns and the recent earthquake in Bangkok, with recovery expected to take several months.
In response to these developments, BBL anticipates that the Bank of Thailand will cut interest rates twice this year, reducing the policy rate from 1.75% to 1.25% in an effort to support economic activity.
Additionally, the Thai baht is expected to strengthen against the U.S. dollar by year-end, reflecting a broader weakening of the dollar in global markets.
