Economy Thai Economy Faces Recession Risks Amid Consumer Confidence Decline and Trade War Worries

[snoop1130]

File photo for reference only

 

Thailand's economic landscape is showing signs of strain as consumer confidence hits a 27-month low, sparking fears of a potential recession. The kingdom is wrestling with anxieties over protectionist trade policies and sluggish economic recovery.

 

The Consumer Confidence Index (CCI), a key indicator of economic health, dropped for the fourth consecutive month from 55.4 in April to 54.2 in May. This decline, reported via a University of the Thai Chamber of Commerce (UTCC) survey of 2,242 individuals, marks the lowest point since March 2023. Other crucial economic indicators, like the Overall Thai Economic Confidence Index and the Employment Opportunity Confidence Index, have similarly dipped.

 

Trade War Anxieties Fuel Economic Pessimism

 

UTCC President Thanavath Phonvichai attributes the persistent decline to fears of global trade conflicts, particularly those linked to "Trump 2.0" policies. "The fall in consumer confidence suggests a downturn and the risk of recession," warned Thanavath, highlighting the fragile nature of economic sentiment.

 

This pessimism persists despite attempts by the government to stimulate the economy in the first quarter and interest rate cuts by the Bank of Thailand. Consumers, however, continue to perceive the recovery as sluggish and face challenges accessing credit, further dampening confidence.

 

Looming Trade Negotiation Deadline

 

Thailand is under pressure as it nears a critical trade negotiation deadline with the United States on July 7. Deputy Prime Minister and Finance Minister Pichai Chunhavajira has announced pending talks, though uncertainties linger on whether an agreement will be reached within the 90-day grace period.

 

According to Thanavath, no country has secured a conclusive negotiation result with the US administration. If reciprocal tariffs become a reality, Thailand's economy could take a significant hit, with potential declines in export and tourism revenue estimated between 150-200 billion baht.

 

Emerging Deflation Risks

 

Economic concerns are compounded by the Commerce Ministry's projection of a negative inflation rate for the second quarter of 2025, hinting at technical deflation. Falling energy and fresh food prices have pushed the headline Consumer Price Index downwards, while low core inflation highlights weakened consumer purchasing power.

 

Businesses share consumer concerns, with the Thai Chamber of Commerce Confidence Index dropping for the third consecutive month to 48.0 in May. Entrepreneurs urge the government to enact stimulus measures that boost purchasing power and liquidity support.

 

Dimming Growth Projections

 

The UTCC projects that Thailand's economy will grow by just over 1% in the second quarter, with an estimated growth of around 2% for the first half of 2025. However, sustaining this growth in the latter half of the year appears challenging, threatening to bring annual growth below the anticipated 1.5-2%.

 

Urgent Economic Interventions Required

 

Thanavath calls for immediate government action, emphasizing the need for a swift deployment of a 175 billion baht stimulus budget to energise the third and fourth quarters. Proposed measures include further interest rate reductions, debt restructuring, and accelerated tourism promotion, especially targeting 35 million international arrivals with a focus on Chinese tourists.

 

Yet, political uncertainties further complicate the landscape. If parliament is dissolved, the 2026 budget drafting could face significant delays, risking the loss of 1.75 billion baht in stimulus project funds under a caretaker government.

 

With fears of trade wars, credit challenges, and political instability swirling, Thailand stands at the brink of its first recession in years. Both consumers and businesses are bracing for potential economic turbulence ahead.

 

  Adapted by ASEAN Now from The Nation 2025-06-13

 

 

[FlorC]

High time for another round of 10.000 Baht.

[lordgrinz]

Time for Thailand to stop manipulating their currency.