Tharavit Prayochvibul, assistant vice-president at Bangkok Bank (BBL), said the economy is likely to grow less than 1% this year if the government cannot persuade Washington to lower its proposed tariff on Thai exports from 36%, reports the Bangkok Post.
“Investor confidence would be hit hard, prompting foreign direct investment to divert from Thailand towards other Southeast Asian countries, particularly Vietnam, which has a tariff of only 20%,” said Mr Tharavit.
A 36% tariff rate could cause Thailand’s auto parts industry to lose its competitive advantage to Indonesian exports, while electronic parts face stiffer competition from goods shipped from Malaysia and the Philippines, noted BBL. Thai textile manufacturers would lose out to Vietnamese exporters, according to the bank.
“It’s time for the central bank to lend its support,” he said. “We predict a high probability the regulator will cut the rate by up to three times later this year to shore up the economy.”
While global trade tensions are easing, abrupt policy shifts remain a risk factor. Thailand still faces domestic pressures including a weak tourism recovery, a fragile agricultural structure, political instability, high household debt and subdued private investment, said Sutthichai Kumworachai, head of the research department at InnovestX Securities.
“We expect the Bank of Thailand to lower interest rates twice to cushion the economy,” he said.
Piyasak Manason, head of economic research at InnovestX, said the global economy will continue to face risks from prolonged trade tensions in the third quarter.
The US economy will likely decelerate due to tariff impacts as the Federal Reserve is not expected to cut rates and inflation could rise to 3.6%, he said.
“For Thailand multiple risks remain, particularly the proposed US tariff that significantly threatens our GDP forecast for 2025 of 1.4%, which assumed a 15% tariff,” said Mr Piyasak.
In the worst-case scenario, which is US tariffs of 29-36%, Thai GDP could contract by 0.1% to 1.1%, with a 20% rate of probability, he said.
Mr Piyasak said the US-Vietnam trade deal signed on July 2 could serve as a reference point for Thailand’s trade negotiations, potentially requiring the elimination of Thai import tariffs on US goods, and significantly increasing imports from the US.
If negotiations succeed and tariffs are lowered to 15-20%, Thai GDP could grow 1.1-1.4% this year, which has a 30% rate of probability, he said. If tariffs range from 21-28%, GDP growth may flatten to 0-1.0%, with a 50% rate of probability, according to the brokerage.
Sitthichai Duangrattanachaya, head of investment strategy at InnovestX, said the brokerage is maintaining its 2025 Stock Exchange of Thailand index target at 1,250 points.
“We view levels below 1,100 points as attractive buying opportunities. The market’s recovery still relies on accommodative monetary policy, accelerated public investment and stable system liquidity,” he said.