Thailand's Economic Crossroads: Betting on Domestic Resilience Amid Export Headwinds

Thailand’s economy finds itself at a critical juncture. Despite a resilient start to 2025, with first-quarter GDP growth of 3.1% year-on-year, the National Economic and Social Development Council (NESDC) has slashed its full-year forecast to a mere 1.3%–2.3%. The culprit? A perfect storm of U.S. tariffs, weak global demand, and structural headwinds. Yet beneath the gloom lies a compelling investment thesis: sectors insulated from trade shocks—domestic consumption, tourism, and infrastructure—are poised to outperform.

For investors, the path forward is clear: overweight consumer staples, tourism-linked equities, and state-backed construction firms, while steering clear of export-reliant industries like electronics. With the Bank of Thailand (BoT) cutting rates to bolster liquidity and fiscal stimulus on the horizon, Thailand’s domestic economy could become a rare bright spot in a slowing Southeast Asian region.

The Divergence: Strength in Q1, Storm Clouds Ahead

Thailand’s Q1 GDP growth beat expectations, driven by robust private consumption and government spending. However, the NESDC’s stark downward revision underscores the risks posed by the U.S. tariffs, which now threaten to shrink export growth to just 1.8%—a full 1.7 percentage points below initial estimates.

The tourism sector, which accounts for roughly 12% of GDP, faces its own recalibration. While 2025’s revised target of 37 million tourists remains strong—down slightly from the 38 million earlier projected—this still trails the pre-pandemic peak of 40 million in 2019. Yet, with inbound travel costs falling and visa-free policies intact, tourism’s recovery remains a pillar of domestic demand.

Domestic Sectors: The Safe Harbor

Consumer Staples: A Steady Anchor

Thailand’s households, though burdened by high debt, continue to drive consumption. Retail sales rose 3.8% in Q1, with staples like food and beverages outperforming discretionary goods. Investors should target companies with pricing power and exposure to everyday essentials.

Firms like CP ALL (0027), operator of the 7-Eleven franchise, and ThaiBev (0096), which owns popular beer and beverage brands, are well-positioned. Their stable cash flows and diversified product lines insulate them from external shocks.

Tourism: A Sustained Recovery

While tourist arrivals have slowed from 2024’s post-pandemic surge, Thailand’s appeal as a budget-friendly destination remains unmatched. Hotels, airlines, and travel platforms are primed to benefit from the government’s redirection of 157 billion THB in fiscal stimulus toward supporting tourism infrastructure.

Companies like Thai Airways (THAI) and Asset World Corp (AWC), which owns the Bangkok Airport Link, could see sustained demand. The latter’s integrated travel and real estate portfolio offers dual exposure to tourism and urban development.

Infrastructure: Betting on the State

With the government pivoting fiscal spending toward sectors hit by tariffs, state-backed construction firms stand to gain. Projects like high-speed rail links and port upgrades—critical to boosting domestic connectivity—are now prioritized.

Firms such as Italian-Thai Development (ITD) and Thai Building Construction (TBC), which have strong ties to government contracts, are likely beneficiaries. Their valuations remain depressed due to lingering trade fears, creating an entry point.

Risks: Avoid the Export Exposures

The electronics sector, a major export earner, faces existential threats. U.S. tariffs on semiconductors and components have slashed demand, while competitors in Vietnam and Malaysia undercut Thai manufacturers on cost. Investors should avoid firms like Hana Microelectronics (HANA) and Supermap (SMP), which lack diversification.

Policy Support: Liquidity and Fiscal Lift

The BoT’s aggressive rate cuts—reducing the policy rate to 1.75%—are injecting liquidity into a strained financial system. While further cuts are constrained by already-low rates, the easing has stabilized credit conditions for businesses.

Meanwhile, the redirected 157 billion THB stimulus targets liquidity support for exporters, tax breaks for SMEs, and infrastructure spending. This fiscal boost, paired with the BoT’s dovish stance, could provide a floor for growth.

Conclusion: A Pragmatic Play

Thailand’s economy is bifurcated: domestic demand is strong, while exports teeter. Investors who focus on consumer staples, tourism, and infrastructure stand to capitalize on the government’s policy push and the resilience of Thailand’s homefront.

Action Items:
- Overweight consumer staples (e.g., CP ALL, ThaiBev)
- Deploy capital in tourism-linked equities (Thai Airways, AWC)
- Target state-backed infrastructure firms (ITD, TBC)
- Avoid electronics and export-heavy industries

The risks are real, but so are the rewards. With Thailand’s domestic economy holding firm, now is the time to bet on resilience—and profit from the storm.