Introduction to Thailand’s Economic Outlook
Thailand’s economic growth is expected to turn positive in the fourth quarter of 2025, according to Bank of Thailand (BOT) deputy governor Piti Disyatat. This prediction is crucial as it indicates that South-east Asia’s second-largest economy may avoid a technical recession after experiencing its first contraction in 11 quarters, with a 0.6% shrinkage in Q3.
Economic Growth Projections
The BOT expects Thailand to meet its annual growth forecast of 2.2% for 2025. Furthermore, the growth momentum is anticipated to moderate to 1.5% in 2026 before picking up to 2.3% in 2027. These projections suggest a positive outlook for the economy, despite current challenges.
Inflation Expectations
Piti Disyatat also mentioned that headline inflation is expected to rebound into positive territory by March or April 2026. The December annual inflation print is anticipated to be at minus 0.34%, as indicated by a Reuters poll. This suggests that the current negative inflation trend may soon reverse, which could have significant implications for monetary policy.
Monetary Policy and Interest Rates
In December, the BOT lowered interest rates for the fifth time since October 2024 to 1.25%, representing a total reduction of 125 basis points. Market participants expect at least one more rate reduction in February. However, Piti emphasized the need for policymakers to be judicious about making further rate cuts, given the limited policy space.
The Role of the Baht
The baht has emerged as Asia’s second-best-performing currency, with an 8% surge in 2025. However, its volatility has added to the economic headwinds, which include US tariffs, high household debt, a border conflict with Cambodia, and political uncertainty ahead of a February election. The central bank has intervened heavily in the currency market to mitigate these effects.
Gold Trading and the Baht
The Thai Ministry of Finance is considering a tax on online gold transactions to contain the currency’s rapid moves. Traders have opposed these measures, arguing that they will reduce Thailand’s appeal as a gold trading hub. Piti Disyatat clarified that the aim is not to eliminate gold trade but to reduce excessive trading that affects the baht. The BOT encourages US dollar-denominated gold trading to minimize the impact on the local currency.
Conclusion
In conclusion, Thailand’s economic outlook appears positive, with expected growth in the fourth quarter of 2025 and a rebound in inflation. However, policymakers must be cautious with monetary policy, given the limited room for further rate cuts. The management of the baht and gold trading will also be crucial in navigating the economic challenges ahead. As the situation unfolds, it will be essential to monitor these factors closely to understand their impact on Thailand’s economy.
