Thai Central Bank Eyes Four Economic Risks for Second Half

The Bank of Thailand is monitoring four key risk factors that could pressure the Thai economy in the second half of the year: high cost of living, geopolitical uncertainty and U.S. trade policy shifts, and potential impacts from El Niño conditions. Deputy Governor Chayavadee Chaianan revealed Thailand's May 2025 economic outlook, noting the economy remains stable overall despite slowing exports, supported by strong tourism, private consumption, and private investment. Inflation remains elevated but steady, and the labor market continues to show stability.

Tourism revenue and foreign visitor numbers increased, particularly from long-haul markets including Chinese and Malaysian tourists during their respective long holidays. However, tourists from some Southeast Asian countries declined due to weak travel demand and fewer flights caused by rising energy costs.

Exports excluding gold fell from the previous month, especially electronics, jewelry, and automobiles, after rapid growth earlier. This reflects weakening foreign demand, though chemical and some petrochemical exports expanded due to higher commodity prices.

Domestic demand improved slightly, with private consumption rising 0.6% from the previous month as spending on consumer goods and vehicles—particularly cars and electric vehicles—expanded despite high oil prices. Consumer confidence declined, however, due to concerns about living costs, income, and future employment trends.

Private investment increased 1.2% from the previous month, driven by transportation and vehicle investments and machinery imports, though commercial construction slowed. Government spending expanded year-on-year from increased central government current and capital expenditures, especially from ongoing stimulus program disbursements, while state enterprise investment declined due to slower infrastructure and utilities spending.

Manufacturing contracted slightly in line with export slowdown, particularly automotive and electronics production, while services remained stable with tourism supporting retail, hotel, and restaurant businesses. Agriculture saw farmer income rise 5% year-on-year from higher prices for palm oil, rubber, and rice.

General inflation stood at 2.79%, steady from the previous month, as energy prices began falling with global crude oil prices. Core inflation edged up slightly from production cost increases passed to some goods, but no broad-based price increases were detected. The current account deficit was $6.4 billion in May, an improvement from April due to reduced energy imports and lower trade deficits, while the labor market remained stable despite some impacts from Middle East tensions and higher costs affecting hotels and transport sectors.