The World Bank has significantly downgraded its growth outlook for Thailand, now projecting GDP growth of only 1.8% in 2025, down from a previous forecast of 2.9%. The prospect for 2026 is now also downgraded to 1.7%, down from the previous forecast of 2.7%. This is especially surprising against Thailand’s 2.5% growth in 2024 which is lagging behind many of its regional peers.
What’s Driving the Slowdown?
The Thailand Economic Monitor report identifies the following headwinds:
- Weakness in exports and tourism especially due to declining Chinese arrivals.
- Weakness in domestic demand as evidenced by low household and business confidence.
- External uncertainties such as global trade pressures and political instability are hindering investor sentiment and delaying measures in fiscal policy.
How Are These Factors Eroding Growth?
Fall in Trade and Tourism
Thailand remains an export-based economy and vulnerable tourism sector. Tourism arrivals, originally expected to return to 37.4 million per year, according to the World Bank are recovering slower than expected. The World Bank now expects total recovery not until the middle of 2026.
Weak Domestic Demand
Consumers and producers are both in a holding pattern. Businesses are delaying expansion because of the uncertain economic outlook, while households are being cautious due to high debt levels and weak wage growth.
Thailand is currently at an important policy crossroads. Relative to other countries, it is possible for the government to consider policies such as fiscal stimulus, investment in infrastructure and the private sector investment and changes to the productive structure of the economy for demand recovery.
While it is likely that regional economies will recover faster, short term conditions in Thailand are uncertain. A coordinated approach in policy will be paramount to reducing risks and putting Thailand back on a healthier growth path.
