Economy Thai Central Bank Slashes Rates, Cuts Growth Forecasts Amid Tariff Fears

[webfact]

Picture courtesy of Bank of Thailand

 

In an assertive move, the Bank of Thailand's Monetary Policy Committee opted for a 25-basis point slash in the policy rate, bringing it to a lowered 1.75%.

 

Announced by committee secretary Sakkapop Panyanukul, this decision is in line with the need to navigate a gloomy economic forecast and adapt to mounting global economic risks.

 

Central to this move is the alignment of financial conditions with shifting economic and inflationary expectations.

 

Thailand's economic prospects are dimming, hit by thorny global trade interactions and a tardy inflow of international tourists. The nation faces a subdued inflation rate poised to slip below the intended target, largely driven by supply-side anomalies, while financial conditions remain stringent.

 

 

 

Global trade tensions are predicted to wreak havoc predominantly in the year's latter half, although their exact impact remains unclear.

 

Forecasts place Thailand’s GDP growth at a cautious 2% should protracted trade discussions sustain and American tariffs remain stable. A hike in tariffs, on the other hand, could shrink economic growth to just 1.3% for the year, according to Sakkapop.

 

The central bank is keen to uphold monetary policies that stabilize prices, underpin sustainable growth, and secure financial steadiness.

 

The central bank downshifted its 2025 growth expectations to 2.0%, revising earlier assessments of 2.5% from February and an optimistic 2.9% predicted back in December.

 

It highlights potential threats to growth, with particular focus on U.S. trade tariffs likely to bite in the closing half of the year. Should trade wars erupt more intensely, this year’s growth might dwindle to a mere 1.3%.

 

A global economic metamorphosis is anticipatory due to U.S. trade strategies and retaliations from other major economies, as outlined in an official statement.

 

Southeast Asia, especially Thailand, is bracing for impact from looming U.S. tariffs, anticipated to climb dramatically to 36% if renegotiations before July's moratorium prove futile.

 

As it stands, Thailand’s economic pace lags behind its regional counterparts, having expanded by just 2.5% the previous year.

 

In response, the BOT trimmed its 2025 inflation forecast from 1.1% to a modest 0.5%, beneath the target zone of 1% to 3%. Projections for tourism arrivals were also slashed, now at 37.5 million, reduced from December's prediction of 39.5 million visitors.

 

Economists remain divided; twenty out of twenty-eight anticipated rate cuts this week, while a few surmised stability in policy. The central bank stays vigilant, prepared to adapt interest rates as deemed necessary, with a watchful eye on the baht currency which remained relatively unchanged following the announcement.

 

Given the prevailing uncertainties, Thailand’s monetary policy committee appears poised for a ‘wait-and-see’ strategy, as outlined by Miguel Chanco from Pantheon Macroeconomics.

 

  Adapted by ASEAN Now from Thai PBS World 2025-05-01

 

 

[Enzian]

The elephant in the room is household debt, which this article doesn't even mention. It's a cultural issue more than monetary or fiscal, and the drop of 25 basis points is not likely to help very much. 

[Unamerican]

4 hours ago, Enzian said:

The elephant in the room is household debt

Why is this?  Full details, please! 

[newbee2022]

I think BOT is too optimistic. 

It could go down very fast by implementing the tariffs and halt talks with EU.