Thailand faces economic turmoil as US tariffs, currency volatility and cheap imports threaten both the 2025 and 2026 outlook, warns central bank chief, preparing to step down amid fears of a prolonged slump and urgent need for targeted government action.
On Friday, outgoing Bank of Thailand Governor Sethaput Suthiwatanaruput warned that Thailand is entering an economic storm. This downturn is expected to begin in the fourth quarter of 2025 and could last for at least a year, if not longer. The primary challenge comes from the US reciprocal tariffs, which will affect not only Thailand’s exports to the US but also the broader external environment and the influx of cheap imports due to dumping. Furthermore, the ongoing trade war has triggered significant financial and currency volatility. Already, these pressures are undermining Thailand’s competitiveness, particularly in exports and foreign tourism. Mr. Sethaput urged the government to take every possible measure to safeguard the country’s valuable financial resources during this turbulent period.
The current Bank of Thailand governor will exit the role later this year. At this time, the government has begun a search for his replacement. By July, two names will be selected for a decision by the Minister of Finance, Pichai Chunhavajira, who will later present a recommendation to Cabinet.
Mr. Sethaput, appointed by former PM Prayut Chan-Ocha’s government, has become a steady influence. He can be credited with guiding the economy through choppy waters in the wake of the devastating 2020–22 pandemic years.
However, as he prepares to step down, he is warning that Thailand is currently heading into a storm. Certainly, the big challenge is the US reciprocal tariff regime, due to come into play on July 9th.
US tariff regime and early ordering by customers provide only temporary lift to Thai export performance
Currently, the 10% baseline tariff is in effect. However, this can be circumvented by an ‘in-transit’ loophole until May 27th.
In the meantime, stepped-up ordering by US customers to fulfil orders before the tariffs impact boosted Thailand’s export figures in March. Indeed, exports were up 17.8% year on year, with sales reaching $29.5 billion. Significantly, exports to the United States were up 34.8%.
However, the real impact on Thailand’s economy will be felt in the fourth quarter. That was the warning on Friday from Mr. Sethaput. In addition, he also expressed concerns about a more volatile financial market, particularly impacting currency values. Presently, the Thai baht has appreciated against the US dollar, negatively impacting both tourism and export competitiveness.
The other key concern for Mr. Sethaput is the massive dumping of cheap products on Thailand’s domestic market. In turn, this will severely impact Thai manufacturers, leaving many dangerously redundant.
US tax overhaul and trade war uncertainty are already shaking market confidence and slowing momentum
Mr. Sethaput warns Thailand’s economic outlook is set to remain sluggish for an extended period. Speaking on 9 May 2025, he compared the growing uncertainty from US tax policy to an incoming storm. This storm, he said, has not yet hit but is already shaking confidence across markets.
“There’s no escaping the storm,” he said. “We don’t know exactly when it will land or how long it will last.” He described the situation as complicated, with many unknowns about which sectors will be hardest hit.
The root of this instability is a sweeping US tax reform under former President Donald Trump. It includes higher import tariffs and changing corporate tax structures. While the full impact on Thailand is still unclear, early signs are emerging. For now, some trading partners are accelerating imports, while foreign investors are delaying decisions.
According to the central bank, the effects will likely intensify in the second half of the year. Thailand’s economy may slow down in the third quarter, reaching a low point in the fourth. As a result, growth this year could follow a “wide V-shape” pattern — a slow decline followed by a gradual recovery.
However, Mr. Sethaput was quick to distinguish this crisis from past economic shocks. “It’s serious,” he said, “but not as deep as the 1997 financial crash, the 2008 global crisis, or the COVID-19 collapse.” Nevertheless, he warned that without adjustment, Thailand’s long-term growth could suffer.
Sector-specific support and long-term reforms key to adjusting and strengthening post-crisis recovery
To weather the storm, targeted strategies are vital. Broad, one-size-fits-all measures won’t work this time, he said. Instead, each sector must receive tailored support depending on how it is affected.
For instance, some industries may face production base relocation. Others may experience employment disruptions. Thus, the government must provide specific incentives or labour assistance to those sectors. “The question is how to soften the shock and help the economy adjust quickly,” Mr. Sethaput explained.
Importantly, he urged policymakers to take this moment as a chance to adapt. “We’ve faced COVID, rising living costs, household debt, and foreign competition,” he noted. “And we survived.” Although this round brings new challenges, he believes Thailand can emerge stronger — if it acts wisely.
He proposed three areas for improvement: deepening trade ties with other nations, raising productivity in services, and targeting economic support. In his view, these moves can raise Thailand’s potential growth once the crisis ends.
Central bank cuts rates as baht volatility grows, warning that policy space is narrow and precious
Meanwhile, the central bank is already doing its part. The Monetary Policy Committee (MPC) recently reduced interest rates. This move reflects concerns over weakening growth and low inflation. Mr. Sethaput described it as a necessary step to support recovery.
Nevertheless, he cautioned that monetary tools are limited. “Our policy ammunition is not unlimited,” he said. “So we must use it wisely and effectively.” For this reason, coordination between monetary and fiscal policies is essential.
Currency volatility is another growing issue. The baht has appreciated lately, driven by a weak US dollar and rising gold prices. According to Mr. Sethaput, many investors are moving to safe-haven assets like gold. Since the Thai baht is closely linked to gold prices — more so than other currencies — it has strengthened further.
“People are buying gold, and our currency moves with gold by about 60%,” he explained. “So the baht has become more volatile.” He admitted the current level of fluctuation is unusually high. Even so, the BOT will not interfere with the market without cause.
Fiscal discipline needed as public debt pressures mount and ill-timed stimulus risks worsening conditions
“We won’t fight the market,” he said. “But if the movement isn’t driven by fundamentals or involves speculation, we will step in.” Stability, he stressed, is crucial to avoiding further disruption.
As for fiscal policy, Mr. Sethaput acknowledged that some may push to raise Thailand’s public debt ceiling. He said the Ministry of Finance would need to take the lead on this issue. Still, he warned that fiscal space is limited and must be used with care.
“In some cases, spending may not suit the economic context,” he said. For example, stimulating consumption during a time when foreign goods are flooding local markets might backfire. “That kind of stimulus could do more harm than good,” he added.
Instead, any new public spending should be focused and efficient. The priority must be to strengthen vulnerable sectors, protect jobs, and build long-term capacity. Misguided policies, he warned, could waste precious resources.
Sethaput urges public-private coordination and sees crisis as a chance for transformation if wisely handled
Despite the grim forecast, Mr. Sethaput remains hopeful. Thailand, he said, has overcome worse. He urged public and private sectors to cooperate in navigating the road ahead. “It’s tough now,” he said. “But we can get through it — the question is how.”
In conclusion, he stressed that this crisis, like all others, presents an opportunity. “If we adapt, negotiate well, and invest in the right areas,” he said, “we can not only survive but grow stronger.” For Thailand, the next six months will be critical.
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The Bank of Thailand stands ready to help guide the economy, but long-term recovery, Mr. Sethaput noted, will depend on how quickly the country adjusts to the storm still gathering over the horizon.
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Further reading:
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