SCB EIC Raises 2025 GDP Growth Forecast to 1.7% on Back of 400 Billion Baht Emergency Loan Decree

SCB EIC has revised its economic forecast for Thailand in 2025 to 1.7% from 1.4%, driven by strong Q1 expansion and government support measures. However, economic growth remains concentrated in certain sectors, particularly technology-related businesses, reflecting a fragile recovery as Middle Eastern conflict risks increasingly impact the Thai economy.

Latest economic data shows heightened impact from Middle Eastern tensions, with general inflation accelerating to 2.9% in April—the highest in over three years—following domestic oil price increases and cost pass-through to consumers, especially prepared food prices. Producer inflation has surged more dramatically to 9.1%, reflecting businesses absorbing higher production costs. This gap suggests cost pass-through to consumer prices will gradually increase ahead, though gains will be limited amid weak economic expansion pressuring business profit margins, particularly for SMEs.

Business dynamics have deteriorated, with new business registrations declining while business closures increased in the first four months of 2025. Business and consumer confidence have weakened sharply since March. Foreign tourist arrivals contracted 7% in April and 3% in the first 17 days of May. Overall exports expanded strongly at 18.7% in March but concentrated in electronics (with Middle Eastern markets collapsing 57.1%), while imports surged 35.7%, resulting in a Q1 trade deficit.

SCB EIC raised its 2025 forecast to 1.7% from 1.4%, though growth concentrates in sectors benefiting from AI and digital trends. Key adjustment factors include: (1) The 400 billion baht emergency loan decree will support growth by approximately 0.6%, with 274 billion baht entering the economy this year—comprising 198 billion in relief programs (like Thai Help Thai Plus) expected to ease cost-of-living pressure from June, and 76 billion for clean energy transition spending from Q3-Q4; (2) Exports and investment show improving trends on Q1 momentum, with sustained high BOI investment approvals and promotion certificates, particularly in AI and data centers; (3) Import values show strong upward pressure, partly reflecting higher import prices, especially global crude oil; (4) The 2025 foreign tourist forecast has been reduced to 31.7 million visitors from 33.2 million due to reduced flights and higher airfares, alongside dampened tourist confidence from safety concerns and weakened purchasing power.

The 1.7% growth forecast represents a significant slowdown from 2.4% in 2024 and 2.9% in 2023, reflecting underlying economic fragility and additional pressures from Middle Eastern conflict. General inflation for 2025 is projected at 3.6% annually, sharply reversing from -0.1% last year, reflecting production cost pressures from the prolonged war. The Bank of Thailand is expected to maintain its policy rate at 1.0% throughout 2025 given the protracted Middle Eastern situation.