The Thai Economy In 2024 and Outlook for 2025
Cyclical recovery lifted the economy through 2024 amid patchy growth and political uncertainty
The Thai economy in 2024 is expected to grow by 2.7%, improving from 1.9% in 2023. Key drivers included the recovery of tourism, growth in domestic spending, and year-end stimulus measures for vulnerable groups. However, private investment is expected to contract, partly due to policy discontinuity following the government transition, delays in public investments, and structural issues within the manufacturing sector.
Tourism experienced robust growth, with the number of international tourists steadily increasing, supported by the visa-free policy extended to over 90 countries. The expansion of flight routes and increased flight frequencies also bolstered the tourism. In 2024, international tourist numbers reached 35.5m, up from 28.2m in 2023. However, the recovery of Chinese tourists—a key market— still lagged behind other markets like Malaysia, Russia, South Korea, and India, which exceeded the pre-COVID levels. For private consumption, it is expected to grow further by 4.8% in 2024, supported by employment in tourism-driven service sector and stimulus measures like the "Easy E-Receipt" program and 10,000-baht cash handouts for vulnerable groups. Nevertheless, consumption growth slowed down following high household debt and volatile weather conditions (both drought and flooding) which hit farm output and income.
Government spending began to play a role in driving the economy from mid-2024 following earlier delays to the passing of the FY2024 budget. Thai exports are projected to grow by 3.9%, recovering from a contraction of 1.5% in 2023. This was supported by the recovery in the electronics cycle and increased demand for agricultural and food products, benefiting from the global service sector's growth. Additionally, some export products experienced accelerated orders due to concerns over the US trade policy changes in 2025. Private investment is expected to contract by 1.5% in 2024, following a 3.2% growth in 2023. This decline was partly due to political uncertainty caused by a sudden change in the prime minister and delays in public spending under the FY2024 budget, which impacted certain public project-related investments.
Headline inflation softened in 2024, aligning with moderate growth of domestic demand and reduced volatility in global crude oil prices. This was further supported by ongoing cost-of-living relief measures, including the price stabilization of electricity and diesel fuel. As a result, the annual inflation rate averaged at 0.4%, down from 1.2% in 2023. The Monetary Policy Committee (MPC) eased policy by implementing a 25bps rate cut to 2.25% in early Q4 and maintaining this level through year-end. The rate cut was aimed to alleviate debt burdens, loosen tight financial conditions (reflected by credit contraction), and support economic growth. The baht fluctuated against the US dollar, weakening in the first half of the year before strengthening in Q3 after the US Federal Reserve (Fed) implemented its first rate cut in four years, reducing rates by 50 bps. However, towards year-end, the baht depreciated again as the US dollar strengthened, driven by signals from the Fed about potentially slowing its rate-cut trajectory in 2025.
Temporary factors will boost the economy in 2025, but ongoing structural issues and potential threats to trade will weigh on growth
Krungsri Research projects the Thai economy to grow by 2.9% in 2025, up slightly from an estimated 2.7% in 2024. Key growth drivers include: (i) tourism recovery, with international tourist arrivals expected to reach a pre-COVID-19 level at 40m in 2025, up from 35.5m in 2024, supported by rising demand, increased flight capacity, expanded routes, and the Visa-Free policy; (ii) public expenditure normalization following delays in FY2024 and a 4.2% increase in FY2025 budget with the budget deficit planned to hit a record high of 4.5% of GDP, further stimulating economic activity; (iii) moderate growth of investment, driven by a 26.5% increase in the government’s capital budget in FY2025, which will induce private investments linked to public infrastructure projects. Additionally, data from the Board of Investment (BOI) revealed that investment promotion applications in the first nine months of 2024 exceeded THB 720bn, the highest in a decade, reflecting the positive outlook for target industries. However, structural challenges in several industries persist, posing potential constraints on the recovery of overall private investments. (iv) Exports are projected to grow by 2.7% in 2025, slowing from 2024 though still benefiting from global economic and trade growth. The IMF forecasts global GDP growth to remain steady at 3.2% in 2025, while the WTO expects global trade volumes to grow by 3.0%, up from 2.7% in 2024. Demand for electronics, driven by the expanding digital economy, and tourism-related goods such as food and beverages will also support Thai exports. However, export growth is likely to remain moderate due to rising trade protectionism, particularly from potential shifts in US trade policy, and structural challenges in domestic manufacturing, which continue to impact the competitiveness of Thai products; (v) Private consumption is expected to increase at a slower pace in 2025 but should grow in line with overall economic growth. Key drivers include the recovery of tourism, which bolsters employment in the service sectors, and measures to boost domestic spending such as the "Easy E-Receipt" program and the government budget of THB 153bn for financing the Digital Wallet scheme. However, consumption may be constrained by a sluggish recovery in real wages and a decline in households’ asset values, particularly among middle-income households. Farm incomes are also projected to decline in 2025, primarily due to lower prices. Additionally, high household debt remains a pressing concern, despite debt relief initiatives for vulnerable groups under the “You Fight, We Help” program.
The Monetary Policy Committee (MPC) is anticipated to lower the policy interest rate by 25bps to 2.00% in the first quarter of 2025 to support economic recovery and alleviate tight financial conditions. Meanwhile, average headline inflation in 2025 is expected to remain near the lower bound of the target range, driven by stable global crude oil prices and domestic energy subsidies, including diesel fuel and electricity price controls.
Thailand’s economy is projected to grow gradually in 2025, supported by various factors. However, it continues to face significant risks and challenges, including: (i) trade tensions and uncertainties surrounding US policies, coupled with geopolitical risks; (ii) an influx of Chinese imports; (iii) severe climate fluctuation, such as the risks associated with the La Niña phenomenon; (iv) structural issues, including high household debt and declining competitiveness; and (v) policy and political uncertainties within Thailand.
