Bangkok: The Bank of Thailand (BOT) has announced that tariffs are expected to slow down the economy until early next year, with exports projected to decline by 4% in the second half of this year and by 2% next year. The BOT refrained from confirming whether Thailand would face a tax rate of up to 36%, which could be a significant economic shock. It stated that the current policy interest rate is appropriate but is prepared to adjust as necessary, with ongoing close monitoring.
According to Thai News Agency, Mr. Sakkapop Panyanukul, Assistant Governor, Monetary Policy Group, BOT, discussed at a recent Monetary Policy Forum the implications of US President Donald Trump's decision to delay the enforcement of retaliatory tariffs on Thailand from July 9, 2025, to August 1, 2025. The tariffs could reach a maximum rate of 36%. The global financial market has anticipated this move, resulting in minimal adjustments, but future clarity is needed. The BOT believes there is still time for negotiations.
The Thai economy showed expansion in the first half of this year, as indicated by quarterly economic indicators. However, challenges remain, including US tax measures affecting exports and investment. It is expected that exports will contract by 4% in the latter half of 2025 and by another 2% in 2026. Tourism is also growing slower than anticipated, impacting consumption into the next year. The Monetary Policy Committee (MPC) has factored these considerations into its policy outlook. While the US tax measures are not expected to impact the Thai economy as severely as the COVID-19 shock, they pose a long-term threat to exports to the US, contingent on business sector adjustments.
The BOT considers current monetary policy supportive of the uncertain economic environment and is prepared to make adjustments should risk levels rise significantly.
In relation to Thailand's proposal to the United States, the BOT emphasizes the need for clarity on additional import tax cuts and their impact on domestic manufacturing. Products produced insufficiently domestically may experience lesser impact.
Earlier this year, the BOT and the National Economic and Social Development Board (NESDB) communicated with the government about short-term and long-term priorities, emphasizing support for sectors affected by foreign goods influx, particularly small-scale SMEs. Short-term measures focusing on import standards, dumping, and import platforms need urgent implementation.
Domestic political factors are considered to impact budget timelines, with political experiences from recent years affecting private sector investment spending.
Mr. Piti Disyatat, Deputy Governor for Financial Stability, BOT, highlighted that the MPC has evaluated the US tariff implications. Despite potential import taxes and recession risks, Thai economic growth is expected to slow in the latter half of 2025, prompting a GDP revision for 2026 to 1.7%, below potential.
The tariffs will impact limited export sectors, accounting for 40% of global exports, with industries like electronics and automotive parts already subject to a 25% tax.
Low inflation rates are attributed to decreasing energy and fresh food prices, not consumption delays or deflation.
The baht has strengthened but remains aligned with regional currencies at a medium level, under close BOT monitoring.
The BOT continues to manage monetary policy to avoid hindering economic recovery, maintaining a relaxed interest rate conducive to growth, but ready to adjust if conditions change.