NESDC cuts GDP outlook to 1.8% amid risks from Trump’s tariffs

Danucha Pichayanan, Secretary-General of the National Economic and Social Development Council (NESDC), announced Thailand’s Q1 2025 GDP figures and the country’s economic outlook for the year on Monday, May 19. He stated that the Thai economy grew by 3.1% in Q1 2025, slightly down from 3.3% in Q4 2024. On a seasonally adjusted basis, the economy expanded by 0.7% quarter-on-quarter.

Q1 growth was driven by government investment, merchandise exports, and public sector spending. However, both private consumption and private investment showed signs of deceleration. Private consumption grew by 2.6%, down from 3.4% in the previous quarter, with declines seen across all product categories.

Non-durable goods spending grew by 1.9%, slowing from 2.3%, mainly due to reduced spending on food and beverages. Service expenditure grew by 4.5%, down from 6.4%, reflecting a slowdown in spending on hotels, restaurants, and healthcare services. Semi-durable goods grew by only 0.9%, compared to 3.7% previously, led by weaker demand for clothing, footwear, and home furnishings.

Durable goods spending declined 1.4%, following a 9.5% drop in Q4 2024. Vehicle purchases were down 2.0%, compared to a 21.2% fall in the previous quarter.

The consumer confidence index for economic conditions rose to 51.5 from 50.5. Government consumption increased by 3.4%, down from 5.4%. Purchases of goods and services rose by 9.8%, while non-cash social welfare transfers rose by 6.0%, and employee compensation increased by 0.9%.

The current expenditure disbursement rate stood at 23.6% in Q1, below the previous quarter’s 36.7%, but above 18.9% in the same period last year.

Total investment grew by 4.7%, continuing from 5.1% in Q4. Public investment grew strongly for the third consecutive quarter at 26.3%, though lower than the previous 39.4%, mainly driven by central government spending, despite a decline in state enterprise investment. Capital expenditure disbursement was 12.8%, down from 13.4%, but up from 5.1% a year earlier.

Private investment fell by 0.9%, following a 2.1% drop in Q4. Machinery and equipment investment declined by 0.3%, and construction investment contracted by 3.8%.

Looking ahead, the NESDC forecasts Thailand’s 2025 GDP growth at 1.3–2.3%, with a median of 1.8%. The main growth drivers include increased public investment aligned with the expanded FY2025 budget framework, stable inflation and unemployment rates, and a continued rebound in tourism and related services.

However, downside risks remain. High household and corporate debt levels, a global economic slowdown, and declining trade volumes—exacerbated by US trade protectionism—may weigh on growth, especially in the second half of the year. Additionally, the agricultural sector faces uncertainties from climate-related risks.

Key projections for 2025 include:

Private consumption growth: 2.4%

Private investment contraction: 0.7%

Export growth in USD terms: 1.8%

Average inflation: 0.0–1.0%

Current account surplus: over 2.5% of GDP

External risks include global trade disruptions stemming from US tariff hikes, China’s economic slowdown, and ongoing volatility in emerging markets. 

Domestically, high household debt and deteriorating credit quality must be closely monitored to avoid rising non-performing loans (NPLs).

NESDC’s Six Policy Recommendations for Economic Management:

Accelerate budget disbursement to inject liquidity into the economy and maintain fiscal momentum, especially in Q1 of the fiscal year.

Prepare for intensified trade barriers, particularly through swift negotiations with the U.S., fast-tracking exports, diversifying markets, and encouraging outbound investment.

Protect domestic industries from dumping and unfair trade practices through strict enforcement and surveillance.

Support SMEs, particularly with liquidity measures to avoid mass layoffs.

Stabilise the agricultural sector by preparing for peak production seasons and investing in small-scale water resource projects.

Boost foreign tourist confidence through safety and quality assurance to sustain tourism growth.