President Trump’s potential second term increases global uncertainty, reshaping trade policies and impacting the economy. Thailand faces challenges from U.S. tariffs, sluggish recovery, and the need for strategic adaptation among businesses.
Global Uncertainty and Economic Forecast
The potential return of President Trump raises global uncertainties in trade and investment policies, as SCB EIC anticipates significant changes that could reshape international relations. Trump’s second term may lead to reciprocal tariffs instead of broader tariffs. The implementation of these tariffs, especially on key imports like automobiles and steel, is expected to elevate the U.S. effective tariff rate by around 11%. If retaliatory measures emerge from trading partners, global GDP might decline by 1.3% and inflation could increase by 0.5% in the medium term.
Thailand’s Economic Outlook
For Thailand, SCB EIC maintains a 2.4% growth forecast for this year, bolstered by tourism recovery and stimulus measures. However, external pressures, particularly from U.S. trade policies, could hinder Thai exports and private investments. The slowdown in the country’s manufacturing sector is anticipated, primarily due to increased imports from China focused on domestic market competition. Additionally, the Thai economy remains fragile, grappling with high household debt and subdued consumer spending.
Strategies for Business Adaptation
To cope with these challenges, Thai businesses are encouraged to adopt the 4P strategy: Product innovation to meet market demands, diversifying markets to reduce dependency, comprehensive risk management, and enhancing productivity for sustainable growth. Despite significant structural weaknesses, opportunities may arise for Thailand to capture market share in the U.S. previously dominated by competitors like China, underscoring the importance of a resilient approach to future economic uncertainties.
Thai Economic Outlook for Q1 2025
SCB EIC’s latest projections indicate that the Thai economy is expected to grow by 2.4% to 2.6% for the full year of 2025, following a 2.7% expansion in 2024. For Q1 2025 specifically, growth is likely to remain modest, driven by a combination of ongoing recovery in tourism and government spending, though tempered by external pressures and structural challenges.
- Tourism as a Key Driver: Tourism will continue to be a primary growth engine. SCB EIC forecasts 39.4 million foreign visitors for 2025, with a significant portion expected in Q1 due to the high season (January to March). However, growth may be constrained by the slow return of Chinese group tours, a trend noted in earlier reports. Assuming a steady influx, tourism revenue should provide a stable boost to the service sector and related employment early in the year.
- Exports and Manufacturing: Export growth is projected to weaken in 2025 compared to historical averages, with Q1 likely reflecting this trend due to intensified trade protectionism (e.g., Trump 2.0 policies) and competition from Chinese overcapacity. The manufacturing sector, still grappling with high inventories and weak domestic demand, may see limited recovery in Q1, particularly in industries like automotive, which faces a potential 40% capacity loss if adaptation to market shifts lags.
- Private Investment and Consumption: Private investment is expected to recover modestly in 2025, with some momentum possibly spilling into Q1, supported by Board of Investment (BOI) approvals from late 2024. However, tight credit conditions and weak domestic demand could cap this growth. Consumption may face headwinds from deteriorating retail loan quality and high household debt, with over 60% of consumers (per the 2024 SCB EIC Consumer Survey) anticipating a worsening economic outlook in 2025, especially among low-income groups.
- Monetary Policy: SCB EIC anticipates a 0.25% policy rate cut by the Monetary Policy Committee (MPC) in February 2025, bringing the rate to 2%, where it is expected to hold steady throughout the year. This move, aimed at easing financial conditions amid softening domestic demand, could provide a slight stimulus in Q1.
- Thai Baht: The baht is projected to range between 33-34 THB/USD by the end of 2025. In Q1, it may experience slight weakening due to U.S. economic factors but could stabilize as the Federal Reserve’s rate-cut cycle progresses, potentially supporting import costs and export competitiveness.
Global Economic Outlook for Q1 2025
SCB EIC downgraded its 2025 global growth forecast to 2.5% from 2.8%, reflecting heightened geopolitical tensions and trade protectionism, notably from anticipated Trump 2.0 policies post-inauguration in January 2025. This global context will shape Thailand’s outlook in Q1:
- Growth Slowdown: Global growth in Q1 2025 is likely to decelerate as Trump-era policies, such as tariffs and deregulation, begin to impact trade and investment flows. The U.S. may see moderate negative effects despite domestic stimulus, while Europe and China face additional pressures, potentially softening demand for Thai exports.
- Inflation and Interest Rates: Global inflation is not expected to rise significantly in Q1, thanks to declining energy prices driven by weaker demand and increased U.S. oil supply. The Federal Reserve is likely to continue rate cuts (following 50 bps in late 2024), with the European Central Bank (ECB) and People’s Bank of China (PBOC) also easing rates, supporting a soft landing scenario. This could ease global financial conditions, indirectly benefiting Thailand.
- Geopolitical Risks: Escalating tensions and protectionism may disrupt supply chains, affecting Thailand’s export-oriented sectors in Q1. Political instability in countries like Germany, France, and South Korea could further complicate global economic coordination.
Key Risks and Considerations for Q1 2025
- External Pressures: Trump 2.0 policies could intensify from mid-Q1, potentially accelerating export slowdowns and supply chain reconfiguration, hitting Thailand’s manufacturing sector hardest in the second half of 2025 but with early signs in Q1.
- Internal Fragility: High household debt and weak income recovery among vulnerable groups may suppress consumption, while SMEs face rising competition from imports, challenging economic resilience.
- Upside Potential: Stronger-than-expected tourism inflows or effective fiscal stimulus (e.g., from late 2024 budget disbursements) could lift Q1 growth above baseline expectations.
President Trump’s potential second term increases global uncertainty, reshaping trade policies and impacting the economy. Thailand faces challenges from U.S. tariffs, sluggish recovery, and the need for strategic adaptation among businesses. Furthermore, the ongoing shifts in U.S. foreign policy could disrupt Thailand’s export-driven industries, particularly in sectors like electronics, agriculture, and automotive parts. As global supply chains remain volatile, Thai businesses must explore diversification strategies and strengthen regional partnerships through frameworks such as ASEAN and RCEP.
In addition, the Thai government may need to implement more robust fiscal policies to counterbalance external pressures and support domestic growth. Investments in innovation, digital transformation, and sustainable practices could also position Thailand more competitively in an evolving global market. While the challenges are significant, proactive measures and resilience could help mitigate the risks and uncover new opportunities for long-term economic stability.
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