Thailand’s economy slows as tourism and manufacturing slump offset export surge

Thailand’s economy lost momentum in May compared to the previous month, weighed down by a slowdown in tourism and a decline in manufacturing output, according to the Bank of Thailand (BOT). The central bank said these factors offset a significant rise in exports.

The BOT noted that tourism revenue and the number of international visitors—particularly long-haul travelers—dropped during the month. In manufacturing, output declined due to prior inventory restocking and a temporary refinery shutdown for maintenance.

Conversely, exports provided a bright spot for the economy, posting strong growth. The BOT attributed the export surge to increased global demand for electronics and a shipment rush ahead of looming tariff deadlines.

The BOT takes measures to support the country’s declining economy 

In May, the BOT said that Thailand had a current account deficit of $0.3 billion. That month, Private investment fell 0.6%  from the previous month, though private consumption was up 0.2%. A steady increase in the use of durable goods backed this trend.

The central bank also mentioned that growth had proved noticeably stronger than expected in the year’s first half, partly due to the rush to fill export orders before US tariffs take effect. However, uncertainties still clouded the outlook. To address this, the bank said it is ready to reduce rates further if needed.

Meanwhile, the Bank of Thailand’s monetary policy committee voted 6 to 1 to maintain the one-day repurchase rate at 1.75%, the lowest in two years. The BOT said its rate cuts in February and April were offering some support to the economy.

A statement mentioned that the Thai economy is expected to slow down due to rising risks to merchandise exports. These risks come from US trade policies, geopolitical issues, and domestic factors.

The stronger-than-expected start to the year prompted the BOT to hike its central-case growth forecast in 2025 to 2.3%, close to last year’s 2.5% and more bullish than some market analysts.

Thailand aims to secure a reduction before the moratorium expires in July

At a press conference, Assistant Governor Sakkapop Panyanukul shared that the committee is prepared to take action if the economy does not grow as quickly as anticipated. 

Still, the BOT’s move is supportive, which implies that there is room for further help in the coming months, a senior ASEAN economist at OCBC Bank, Lavanya Venkateswaran, said.

Venkateswaran added that their call is for a further 25 basis point cut in the second half amid several risks to growth from worries about domestic politics and US tariffs.

Capital Economics, meanwhile, expected 50 possible basis points of rate cuts by the end of the year.

The Thai baht showed little immediate reaction against the US dollar after the decision to keep rates unchanged, which had been expected by 21 of 33 economists in a poll conducted.

The BOT also cut its forecast for tourist arrivals, another potential driver of domestic growth, to 35 million this year.

Thailand faces a 36% US export tariff, a major growth driver, if it fails to win a reduction before a moratorium expires in July. Additionally, most countries will have to pay a 10% tariff while the moratorium takes effect.

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