Thailand's central bank delivered its first interest rate cut since 2020, intensifying pressure on Prime Minister Paetongtarn Shinawatra to revitalize the struggling economy. The Bank of Thailand (BOT) cut its key rate by 25 basis points, a move seen as a response to lackluster economic growth, but emphasized it was not the start of an easing cycle.
Now, with no further excuses, Paetongtarn’s government must act to stimulate the economy, which is weighed down by household debt, weak consumer spending, and declining industrial sentiment. Thailand’s economy grew by 2.3% year-on-year in the second quarter, but analysts expect further headwinds, with GDP growth projected to slow to 2% in 2025, according to Pantheon Macroeconomics.
The BOT revised its 2025 growth forecast down to 2.9%, with 2024 growth expected at 2.7%, lagging behind other Asian economies. Thailand's critical industries, including the automobile sector, are struggling, and factory closures are adding to the country's economic woes.
Paetongtarn’s government has launched a $14 billion stimulus program, offering 10,000 baht to 45 million people through a digital wallet handout. However, the challenge remains in implementing additional measures to spur growth and improve consumer confidence amid rising pressure to address low inflation, which stood at 0.61% in September.
Finance Minister Pichai Chunhavajira has called for a higher inflation target to boost prices and liquidity, while political friction over the appointment of a BOT board chairman adds complexity to the government’s economic strategy.
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