Bangkok, May 2, 2025 – Thailand’s economic and banking sectors are bracing for a turbulent year as global trade disruptions, domestic fiscal pressures, and a recent downgrade by Moody’s Ratings cast a shadow over growth prospects.
The ratings agency’s decision to shift Thailand’s sovereign rating outlook from “stable” to “negative” on April 29, 2025, followed by a similar downgrade for seven major Thai banks, has sparked concerns about the country’s ability to navigate mounting challenges. With U.S. tariffs, sluggish tourism recovery, and high household debt levels weighing heavily, analysts warn that Thailand’s economic growth could dip to as low as 1.6% in 2025, far below earlier projections.
Thailand’s economy, heavily reliant on exports and tourism, is facingissues. The World Bank recently slashed its 2025 GDP growth forecast for Thailand from 2.9% to 1.6%, the lowest among ASEAN nations, citing a global trade slowdown, delayed fiscal budget disbursements, and rising public debt projected to reach 64.6% of GDP. The Bank of Thailand (BOT) and the Finance Ministry have also revised their estimates downward, with the BOT now projecting 2% growth in a best-case scenario, while the Finance Ministry forecasts 2.1%.
The primary driver of this downgrade is the imposition of a 36% U.S. tariff on Thai goods, announced by President Donald Trump on April 2, 2025, which threatens to disrupt Thailand’s export-driven economy. Exports, which account for a decent portion of GDP, saw a temporary 17.8% surge in March 2025 as businesses rushed to ship goods before the tariffs took effect, but analysts predict a sharp decline in the second half of the year.
Despite these challenges, the government remains optimistic, pointing to accelerated budget disbursements and stimulus measures like the controversial “Digital Wallet” program, which aims to boost consumption through cash transfers. The Finance Ministry claims these policies could push growth beyond current forecasts, with GDP growth reaching 3.2% in Q4 2024 as evidence of their effectiveness. However, critics, including the opposition People’s Party, argue that the stimulus is a temporary fix that fails to address structural issues, and its high fiscal cost—estimated at 145 billion baht (0.8% of GDP)—raises concerns about long-term sustainability.
Moody’s downgrade of seven Thai financial institutions, including major banks like Bangkok Bank (BBL), Kasikornbank (KBank), and Siam Commercial Bank (SCB), reflects growing risks in the banking sector. The agency cited a deteriorating macroeconomic environment, exacerbated by U.S. tariffs and global uncertainties, as well as Thailand’s sluggish post-pandemic recovery. Thai banks, already grappling with weak loan growth and rising non-performing loans (NPLs), face further strain from a potential weakening of the government’s capacity to provide support in a crisis.
As of September 2024, total NPLs reached 1.2 trillion baht, a 14% year-on-year increase, driven by high household debt levels at 89.8% of GDP. The BOT has expressed alarm over this trend, with Governor Sethaput Suthiwartnarueput highlighting the risks posed by both household and public debt, which stood at 12 trillion baht (64.2% of GDP) as of February 2025. In response, the BOT cut its benchmark interest rate by 25 basis points to 1.75% in April 2025, marking its third reduction in a year, to stimulate growth and ease borrowing costs.
The central bank is also rolling out a second round of debt relief measures, offering lower interest rates and debt write-offs to support households and small businesses. However, analysts warn that prolonged low interest rates could weaken the Thai baht, increasing import costs and inflation, which is projected to remain subdued at 0.8% in 2025. A depreciating baht could benefit exporters but risks further straining households reliant on imported goods like oil.
Thailand’s economic woes are compounded by structural issues, including declining competitiveness in manufacturing and small and medium enterprises (SMEs). The automotive industry, a key export sector, faces pressures from both price and demand factors, while SMEs struggle with limited access to financing and competition from cheap Chinese imports. The World Bank stated that boosting private-sector productivity through technology adoption and innovation is critical for Thailand to remain competitive, particularly as regional peers accelerate their innovation efforts.Thailand’s role in regional value chains makes it vulnerable to disruptions, and rising oil prices could further inflate production and transportation costs. The BOT has stressed the need to strengthen financial stability, noting that while Thailand’s international reserves are robust, caution is warranted given past crises like the 1997-1998 Asian financial meltdown.
Prime Minister Paetongtarn Shinawatra has vowed to restore investor confidence and drive steady growth, dismissing Moody’s downgrade as an overreaction that fails to account for ongoing U.S. trade talks scheduled for May 2025. The government is banking on public investment, which reached a decade-high 72% of total investment in 2024, to create jobs and stimulate demand. Other initiatives include promoting creative tourism, such as indoor attractions to counter climate change impacts, and diversifying export markets, with Switzerland emerging as a key partner.
To address long-term growth, analysts like Kobsak Pootrakool from Bangkok Bank urge the government to target 3-4% annual growth through infrastructure development, high-potential industries, and human capital investment. As the BOT deputy governor noted, monetary policy remains “somewhat accommodative,” with room for further easing if needed, but the path to sustainable growth remains fraught with uncertainty.
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