Thai and Global Economics
Global trade tensions tend to intensify; Krungsri Research sees Thai economic growth to reach 2.7% this year and 2.9% in 2025.
US and Glabal
US plans to impose tariffs on many countries. The Fed may slow the pace of interest rate cuts in 2025. President-elect Donald Trump announced plans to impose a 25% import tariff on goods from Canada and Mexico and an additional 10% tariff on imports from China on his first day in office (20 January, 2025). This move aims to address immigration and drug trafficking issues. Also, the US Commerce Department preliminarily calculated dumping duties of 21.31%-271.2%, on solar cells from Cambodia, Malaysia, Thailand and Vietnam, with a final decision expected on April 18, 2025, and the final order announcement on June 9. Meanwhile, on November 30, Trump threatened to impose a 100% tariff on all imports from the nine BRICS countries if they support any currency intended to replace the US dollar.
Regarding the US economy, its 3Q24 GDP grew by 2.8% QoQ annualized, down from 3.0% in 2Q24, driven by consumer spending and exports. However, October PCE inflation rose slightly, with headline and core PCE up from respectively 2.1% YoY and 2.7% to 2.3% and 2.8%.
Although the market recently saw a 66% probability of US Fed’s rate cut of 25 bps to 4.25%-4.50% at its December meeting, the likelihood of consecutive cuts in 2025 remains low. This is due to (i) the US economy maintaining stability despite a slowdown (a soft landing) and (ii) uncertainties surrounding Trump's economic and trade policies, which could drive inflation higher and pose risks to the US economy. However, the strengthening US dollar (+4.4% YTD) is expected to mitigate the impact of rising import prices caused by tariff hikes. Also, real interest rates remain high, providing room for the Fed to continue easing monetary policy.
Regarding trade policy, if Donald Trump follows through on his proposal by imposing 60% tariffs on all Chinese goods and 20% tariffs on imports from the rest of the world, and if China responds with similar tariffs on US goods, our analysis indicates that this will shave between -0.17% and -0.28% from growth in global GDP.
Thailand
Tourism sector and private consumption should support Thai economy in the last quarter of the year. The Bank of Thailand (BoT) reported that the economic conditions in October improved from the previous month, driven by an increase in foreign tourist revenue (+2.8% MoM seasonally adjusted) and private consumption (+0.8%). Private investment also rose (+4.5%), supported by growth in machinery, equipment, and construction investments, aligning with the expansion in government spending. While exports jumped 14.2% YoY, seasonally adjusting the figures and excluding gold turns this into a contraction of -0.1% MoM. Industrial output also edged up slightly (+0.9%).
Krungsri Research expects an improvement in the Thai economy in 4Q24, projecting a rate of 4.0% YoY, up from 3.0% in 3Q24. Key supporting factors include: (i) increased government spending on both current and capital expenditures; (ii) stimulus programs, such as the distribution of 10,000 baht to over 14 million vulnerable individuals and domestic tourism promotion initiatives; (iii) a rise in foreign tourists during the high season, expected to reach 9.5 million, up from 8.6 million in the previous quarter; and (iv) last year’s low base. Krungsri Research has revised up its 2024 GDP growth forecast to 2.7% from the previous 2.4%.
For 2025, the economy is expected to improve slightly to 2.9%, driven by normalized government spending following delays in FY2024, accelerated public investment, and continued recovery in the tourism sector, with foreign tourist arrivals expected to return to pre-COVID-19 levels. However, several internal and external risks and challenges remain being to monitor. These include intensifying trade tensions, geopolitical conflicts, an influx of Chinese imports, climate variability, and structural issues such as high household debt and declining competitiveness, all of which will continue to pressure overall economic growth.
