Thailand’s economic stability in question as World Bank slashes 2025 GDP forecast to 1.6%

Speaking at a gold donation ceremony in Bangkok, Sethaput acknowledged that Thailand’s foreign exchange reserves are currently strong—at $276 billion, a tenfold increase from 1997’s $23 billion during the Asian financial crisis. He credited national initiatives like the gold donation campaign as contributing to this resilience.

However, he warned that despite stronger fundamentals compared to the 1997 crisis, rising household and public debt have eroded Thailand’s overall stability. Gold donations, which are held in a special foreign reserve account, play a critical role in maintaining currency confidence and protecting against inflation—especially when compared with countries like Argentina, Venezuela, and Zimbabwe, which have experienced hyperinflation due to excessive money printing without asset backing.

Sethaput emphasized the importance of keeping Thailand’s foreign exchange reserves legally protected under the current framework, which separates operational and reserve accounts under two key financial laws. He cautioned that proposed legal changes that would merge these accounts could expose the reserves—including donated gold—to financial misuse, weakening national economic safeguards.

World Bank cuts Thai growth forecast

In a separate report, the World Bank slashed Thailand’s 2025 GDP growth forecast from 2.9% (January estimate) to just 1.6%, marking a 1.3 percentage point drop—the lowest growth forecast among major ASEAN economies (excluding Singapore, Brunei, and conflict-affected Myanmar). For 2026, the forecast was also revised down from 2.7% to 1.8%.

The regional outlook for East Asia and the Pacific was similarly downgraded to 4.0% from 4.6%, due to:

• Rising global economic policy uncertainty, especially around trade;
• Increasing trade restrictions, particularly tariffs; and
• Slowing global economic growth.

Thailand and Malaysia are especially vulnerable to shifts in U.S. demand, while Cambodia and Vietnam face similar risks. Although Thailand implemented consumption-stimulus measures in late 2024, long-term challenges—including high household debt and global uncertainty—are expected to weigh down private consumption.

Private investment in Thailand is also declining due to tight credit conditions and efforts to control private sector debt. In contrast, Malaysia has seen rising foreign direct investment (FDI) in ICT and manufacturing, particularly in data centers. Public investment is helping offset weak private sector investment in countries like China, Indonesia, and the Philippines.

World Bank recommends three-point policy strategy for Thailand

To strengthen economic resilience, the World Bank recommends Thailand:

• Adopt new technologies to improve productivity and job creation;
• Pursue reforms to boost competitiveness, especially in the services sector—as seen in Vietnam; and
• Enhance international cooperation, deepening trade and investment partnerships to bolster economic strength.

Manuela V. Ferro, World Bank Vice President for East Asia and Pacific, said: “East Asia and the Pacific still has the opportunity to sustain strong economic momentum through innovation, reform, and deeper international cooperation.”

Aditya Mattoo, the region’s chief economist, added: “Combining technology adoption with serious reform and international collaboration is the formula for boosting productivity and creating better jobs.”