Thai Economy Faces Competitiveness Decline as Central Bank Warns of Export Pressures

Thailand's central bank warned that the country's economic competitiveness is declining, with exports expected to be negatively impacted by U.S. tariffs and a strong currency according to central bank statements. The Southeast Asian economy is also dealing with high household debt, a border conflict with Cambodia, and political uncertainty ahead of early February elections as reported.

The Bank of Thailand (BOT) reported that GDP growth in the second half of 2025 is expected to have reached 1.3% year-on-year, with exports up 9.1% over the same period according to economic data. Despite the growth, deflation risks remain low and inflation expectations are stable within the central bank's target range according to central bank analysis.

The strong baht is creating liquidity challenges for small- to medium-sized exporters, which is weighing on their export performance according to market reports. BOT deputy governor Piti Disyatat said that economic growth turned positive in the fourth quarter of 2025 and expressed confidence in meeting the year's growth forecast of 2.2% according to official statements.

Why Did This Happen?

The Thai baht's appreciation has added pressure to the economy, with the central bank intervening in the currency market in the second half of 2025 to manage volatility according to central bank reports. Piti emphasized the need for judicious use of remaining monetary policy tools to address potential shocks from global markets or a slowdown in domestic demand as stated by the deputy governor.

The appreciation of the baht, combined with U.S. tariffs and high household debt, is creating a challenging environment for Thai exporters according to economic analysis. These factors are contributing to the central bank's cautious outlook for 2026 and 2027, with growth expected to moderate to 1.5% in 2026 before rising to 2.3% in 2027 according to BOT panel forecasts.

How Markets Reacted

Market participants are expecting at least one more rate cut in February 2026, according to LSEG data as reported by financial sources. The central bank has already reduced rates by 125 basis points since October 2024, bringing the policy rate to 1.25% according to economic reports.

The BOT's focus is on managing baht volatility, which has been exacerbated by excessive gold trading in local currency according to central bank analysis. The government is also considering measures such as a tax on online gold transactions to reduce the currency's rapid movements as reported by financial sources.

What Analysts Are Watching

Analysts are closely monitoring the impact of U.S. tariffs on Thai exports, particularly for small- to medium-sized firms according to market analysis. The appreciation of the baht is making exports more expensive, which could further weigh on economic growth as noted by economic observers.

The upcoming election in early February is also expected to create uncertainty for fiscal policy and budget disbursement according to financial analysis. The fiscal framework for 2027 outlines a narrowing deficit, which could slow government spending and impact growth as reported by economic analysts.

The services sector, particularly tourism, is expected to see a gradual recovery in 2026 and 2027, with visitor numbers projected to rise to 35 million in 2026 and 36 million in 2027 according to economic forecasts. However, uneven growth remains a concern, with large firms and specific sectors outpacing the broader economy as noted by economic reports.