The economic growth forecast has been consistently downgraded this year, including the latest announcement from the National Economic and Social Development Council (NESDC) last week, which revised the 2025 projection down to 1.8% from 2.8%, reports the Bangkok Post.
Despite an economic expansion of 3.1% year-on-year in the first quarter, the NESDC warned people should be cautious with their spending to brace for the impact of a slowdown going forward.
NO HOPE, NO HOME
Given the NESDC prodding about belt-tightening, the housing market is likely to be affected by the economic slowdown, as buying a home involves a significant investment and long-term debt.
Kessara Thanyalakpark, managing director of SET-listed Sena Development, said homebuyers are driven by real demand, whether they are young professionals just starting their careers or families looking to settle down.
"Purchasing a home, one of life’s four basic necessities, is particularly prone to economic concerns and rising household debt," she said.
"When consumer sentiment is weak, people don’t want to buy anything, and that includes homes. Few are willing to take on 30 years of debt in times like these."
Ms Kessara said the residential market is expected to contract this year in line with the economic slowdown.
In the first quarter of 2025, before the earthquake and the NESDC’s warning, the average bank mortgage rejection rate soared to more than 50%.
"The NESDC’s warning about consumer spending reflects the reality," she said. "The housing market has been affected by banks tightening mortgage lending criteria."
One factor behind the recent surge in mortgage rejections is some banks stopped counting overtime pay as part of borrowers’ income, reflecting growing concerns about economic uncertainty.
In this climate, increasing housing sales is difficult, prompting many developers to diversify into non-residential sectors, especially industrial property, which has posted steady growth in recent years.
Although the Bank of Thailand eased loan-to-value limits and the government extended reduced transfer and mortgage fees until June 30, 2026, the impact has been minimal, said Ms Kessara.
CAREFUL DRIVING
In the automotive sector, prospective buyers are expected to think more carefully before making purchases amid growing concerns over the volatile economy, said Martin Schwenk, president and chief executive of Mercedes-Benz (Thailand).
As domestic vehicle sales remain tepid in the second quarter, people are becoming more cautious about spending as a result of global economic uncertainty caused by US President Donald Trump’s reciprocal tariff policy, he said.
The Thai economy cannot avoid the impact of tariffs, which should become clearer in the second half of this year, said Mr Schwenk.
The downturn should exacerbate sluggish car sales in Thailand due to buyers’ difficulties in accessing auto loans amid elevated levels of household debt, he said.
"I believe the Thai car market will contract more later this year as I don’t see any positive signs," said Mr Schwenk.
Sales in passenger car and pickup categories are most likely to bear a heavy brunt.
"Even luxury cars cannot avoid the impact, though it is limited because people are more careful about spending," he said.
From January to April, domestic sales fell by 4.8% year-on-year to 200,386 vehicles, attributed mainly to banks and car financing companies’ strict lending criteria, according to the Federation of Thai Industries.
Sales of passenger cars and pure pickups in the internal combustion engine category decreased by 13.8% to 48,784 units and 15.4% to 51,319 units respectively during the four-month period.
LOAN SHRINK
Kanjana Chockpisansin, head of banking and financial sector research at Kasikorn Research Center (K-Research), said she anticipates greater challenges for the banking sector over the remainder of the year, primarily stemming from uncertainty surrounding US tariff hikes, a factor that could dampen both private investment and consumer spending.
Thailand’s slowing economic growth and persistent household debt are expected to reduce consumer purchasing power and weaken the debt repayment capacity of retail borrowers, particularly among vulnerable segments, she said.
Given these factors, K-Research projects loan growth in the banking sector to tally 0.6% year-on-year in 2025.
Retail loans are forecast to contract by 1% this year, primarily due to a sharp decline of 7.5% in auto loans. Mortgages are expected to grow marginally by 0.5%, while unsecured loans may increase by 1.3%, noted the research house.
As the world waits for an update on the 90-day pause of US tariff hikes, these loan growth projections could be adjusted downward, said Ms Kanjana.
Meanwhile, the net interest margin of the banking sector is expected to decline to 2.83% in the second quarter of this year, down from 2.92% in the previous quarter, in line with the Bank of Thailand’s policy rate cut as part of a broader accommodative monetary policy cycle.
The central bank reported total loan growth for banks contracted by 1.3% year-on-year in the first quarter this year.
This trend is expected to continue in the second quarter amid ongoing economic uncertainty. Retail loan growth rose only 0.2% year-on-year in the first quarter, while auto loans plunged by 10.2%.
The slowdown in loan growth contributed to a decline in the household debt-to-GDP ratio, which fell to 88.4% in the fourth quarter of 2024, compared with 88.9%, 89.7% and 90.7% in the previous three respective quarters.
LOW ENERGY
PTT Oil and Retail Plc (OR) is bracing for the impact of slow growth and the trade war on its fuel business, which may include an oil stock loss this year, said Pitirat Rattanachote, manager for investor relations.
A sluggish economy is usually a key indicator of fuel consumption in Thailand. Weak economic expansion leads to lower demand for diesel, gasoline and gasohol, a mix of gasoline and ethanol.
As US tariff threats and global economic uncertainty hamper outlooks, many countries including Thailand are unlikely to avoid negative impacts on their economies, and a subsequent decline in global crude oil prices, she said.
While Thai GDP growth was 3.1% in the first quarter, consumption of diesel, gasoline and gasohol fell, though demand for all types of fuel in the country rose by 1.3% for the period, according to the Department of Energy Business.
Ms Pitirat said OR is adopting various approaches to cope with a sluggish economy and lower crude oil prices, such as trimming operating costs, better management of oil inventory and oil price hedging.
These are expected to help prevent massive oil stock loss, she said.
The company estimates global crude oil prices to range from $50-70 per barrel this year.
In the jet fuel category, Ms Pitirat said sales will remain healthy this year despite a drop in Chinese arrivals, which should be offset by more visitors from the Middle East and India.
For its non-oil business, OR expects its coffee sales under the Cafe Amazon brand to keep growing this year despite the sluggish economy.
In the first quarter, the company registered a new record high with 104 million cups, an increase of 5.1% year-on-year from 99mn cups.
Somchai Sittichaisrichart, managing director of SiS Distribution (Thailand), said the IT product market remains strong in the second quarter, with the impact of US tariffs expected to be felt in Thailand in the third quarter.
While sales of low-end smartphones have slowed, high-end smartphones have felt less effect from the flat economy, he said.
LOST APPETITE
Worawat Phothakanapong, chief executive of Kamol Pork, which operates pork retail shops, a farm and a slaughterhouse, noticed a decline in consumer purchasing power since the start of this year.
There have been fewer orders and lower sales per bill across all locations, he said.
Kamol Pork operates 14 retail shops in Bangkok, Nonthaburi and Samut Prakan, down from 18 branches in 2024, as several underperforming outlets closed.
Sales per transaction are about 50% lower year-on-year, though Mr Worawat did not disclose specific figures.
The key customer segments are middle to lower-income individuals and operators of buffet restaurants, particularly those offering Thai-style BBQ pork, known as moo krata.
This year the company has lost about 50% of regular customers who operate buffets, with around 40% of those businesses shutting down, he said.
Remaining customers have changed their purchasing habits, opting not to stock up on raw materials such as marinated pork like they did before, said Mr Worawat.
"In the past, they would reorder when their stock was low, but now they are waiting until they run out completely," he said.
Individual customers are leaning more towards ready-to-cook options, such as marinated pork, rather than fresh pork, which increased in price, said Mr Worawat.
NEW TERM, OLD UNIFORM
Arnon Chitmeesilp, managing director at Nomjitt Manufacturing Co, a Thai school uniform producer, said the country’s economy is sluggish this year.
"This caused consumer confidence to decline," he said.
"Consumers may lack confidence in how the government is tackling the sluggish economy, coupled with the global economic uncertainties. Even those with spending power may hold back on spending right now. For those struggling financially, the situation may worsen."
With the school semester starting in mid-May, Mr Arnon said some parents are spending less on school uniforms.
Some parents may opt to extend the use of their children’s current uniforms, he said.
Other parents might delay buying uniforms until after the school term begins as the start brings numerous expenses, such as tuition fees and textbooks, said Mr Arnon. In the past, parents always bought uniforms before the semester starts.
Parents typically purchase an average of two sets of uniforms per child each year, as they still have last year’s uniforms, he said. Some parents who buy 4-5 sets of uniforms per child at the start of the academic year might only buy three sets this year, said Mr Arnon.
Only high-income customers will be unaffected by the economic downturn, as sales in this segment remains stable, he said.
A small number of customers may opt for cheaper school uniforms from competitors, said Mr Arnon. Uniform prices from market leaders tend to be slightly higher, but they have better quality as a result of economies of scale, he said.
While many industries are shrinking, Thailand’s beauty industry is poised for continued growth, according to retailer Eveandboy Co.
Hiran Tanmit, chief executive of Eveandboy, said the local beauty business relies on emotional and lifestyle influences rather than economic conditions.
"This has motivated brands to develop unique identities to better capture and connect with consumers," he said.
FEWER TRIPS
Paisarn Sukjarean, president of the upper northern chapter of the Thai Hotels Association, said the number of Thai guests at hotels in Chiang Mai has significantly declined since the beginning of this year.
Hotel operators recorded healthy guest numbers for only five days during the Songkran holiday in April, but after the market sharply dropped, he said. Average occupancy plunged to 40% in May, below the typical rate of more than 50% for this month.
The dip in guests is also attributed to weaker demand from the Chinese market, said Mr Paisarn. However, June figures could improve when the Middle East market visits Chiang Mai to enjoy the rainy season, he said.
"Thai guests typically comprise 30% of guests in Chiang Mai hotels. They took fewer trips to the North this year to save money and prepare for economic uncertainties. Many are waiting for the government’s co-payment campaign. The longer the government delays this scheme, the more hotels will be affected," said Mr Paisarn.
The decline in tourist numbers also had a ripple effect on the agricultural sector in the province, as they sold fewer of their products, he said.
Tourists clearly exercise more caution now when shopping, said Mr Paisarn.
"Among the tourist markets that sustain Chiang Mai, Chinese had the highest average spending as they buy all kinds of local products. European guests grew consistently, and they have longer stays, but their daily spending was still much lower than the Chinese," he said.