Thailand has lost its last growth engine
Thailand has lost its last engine of growth and people are abandoning hope for a decent life.
The first half of the previous sentence is being well documented in the media after a sharp drop in the number of tourists coming to Thailand, with the situation likely to get worse when Donald Trump's tariff policy comes into full effect in July.
However, the second half of the sentence about the economic impacts of lower tourism income has not yet been analysed. Thailand has four growth engines: (1) Investment, (2) Consumption, (3) Exports, and (4) Tourism. Many agree the first three burned out some time ago, making Thai GDP growth one of the lowest in Asean.
The only force keeping the economy from plunging into a dark abyss is the last engine -- tourism -- which has been booming since the end of the Covid pandemic. Tourist numbers are now close to the pre-Covid level. It was projected the number of foreign tourists would increase by 7.5% this year, reaching 38.2 million visitors.
Without a booming tourism sector, the Thai economy would have had negative GDP growth both in 2023 and 2024. Unfortunately, things changed unexpectedly since February 2025.
The number of incoming tourists, which expanded 26.7% in 2024, shrunk 6.9%, 8.8% and 7.6% respectively from February to April. It was the first contraction in five years.
Disappointing tourism performance is the key factor that led to a 1.0% cut in GDP growth projections for 2025. The projected 2.8% GDP growth has now been lowered to 1.8% by the government's planning agency, the National Economic and Social Development Council (NESDC). Both the IMF and the World Bank agreed and both lowered 2025 GDP growth for Thailand to 1.8% and 1.6% respectively. A local research house is even more pessimistic, projecting a 1.4% GDP growth for this year.
https://www.bangkokpost.com/opinion/opi ... wth-engine
Major Economic Issues For Thailand
Re: Major Economic Issues For Thailand
Who is the happier man, he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed? - Hunter S Thompson
Re: Major Economic Issues For Thailand
Things are so bad here now that even Bloomberg has taken note ...
Thailand Is Languishing at Just the Wrong Moment
Deliberation is generally a sound attribute, but Thailand is discovering it also has costs. The country’s economic woes, magnified by the US trade war, have become too great to ignore.
This isn’t an acute crisis that’s bound to consume the neighborhood in the manner of the late 1990s financial collapse. It’s more of a slow-burning challenge that mixes uber-caution on interest rates at a local level with broader underlying regional trends of tepid price gains and slackening growth. Attention is warranted, nonetheless.
Recession threatens and inflation, already microscopic when Donald Trump returned to the White House, is heading south. Even tourism, usually something the country with famed resorts and splendid temples can fall back on during soft patches, is languishing. The third season of HBO’s hit television show The White Lotus — set on the southern island of Koh Samui — garnered millions of viewers but failed to pay big dividends for the kingdom.
The response to these woes, which have been building for a long time, hasn’t won rave reviews. Fractious politics aren’t helping. The unwieldy coalition that came together in August to install former leader Thaksin Shinawatra’s daughter, Paetongtarn, as prime minister is under strain. The central bank appeared to be slow-walking needed cuts in interest rates and seemed more concerned with fending off pressure from politicians. Just because ministers urged robust action didn’t mean their arguments were entirely bereft of substance.
https://www.bloomberg.com/opinion/artic ... ong-moment
Thailand Is Languishing at Just the Wrong Moment
Deliberation is generally a sound attribute, but Thailand is discovering it also has costs. The country’s economic woes, magnified by the US trade war, have become too great to ignore.
This isn’t an acute crisis that’s bound to consume the neighborhood in the manner of the late 1990s financial collapse. It’s more of a slow-burning challenge that mixes uber-caution on interest rates at a local level with broader underlying regional trends of tepid price gains and slackening growth. Attention is warranted, nonetheless.
Recession threatens and inflation, already microscopic when Donald Trump returned to the White House, is heading south. Even tourism, usually something the country with famed resorts and splendid temples can fall back on during soft patches, is languishing. The third season of HBO’s hit television show The White Lotus — set on the southern island of Koh Samui — garnered millions of viewers but failed to pay big dividends for the kingdom.
The response to these woes, which have been building for a long time, hasn’t won rave reviews. Fractious politics aren’t helping. The unwieldy coalition that came together in August to install former leader Thaksin Shinawatra’s daughter, Paetongtarn, as prime minister is under strain. The central bank appeared to be slow-walking needed cuts in interest rates and seemed more concerned with fending off pressure from politicians. Just because ministers urged robust action didn’t mean their arguments were entirely bereft of substance.
https://www.bloomberg.com/opinion/artic ... ong-moment
Who is the happier man, he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed? - Hunter S Thompson
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pharvey
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Re: Major Economic Issues For Thailand
Of course the shift in Global Finances and Policies must effect Thailand despite what goes on "in-country" - be it Tourism, Farming/Manufacturing, Financial Wellbeing or Global Alliances.... The World is changing rapidly and could dramatically take a turn for the worse after recent events in the Middle East.
"Hope is a good thing, maybe the best of things" - Yma o Hyd.
Re: Major Economic Issues For Thailand
This will cause some serious issues my thoughts were, but, strangely enough the major indices in the US were only slightly lower and the current Asian indices are up/down but never more than 1%....the EU indices are mainly unchained. The USD vs THB is positively effected, basically in Thailand expats favor.
BTC dropped below 100K last night but is recovering slightly, 10.00 AM at $101,000. Oil prices up with 5% which translates to 0.25 USD at the US pumps
All and all where in the past the economic reaction was knee jerking feet stayed on the ground. Firmly? We will find out..
BTC dropped below 100K last night but is recovering slightly, 10.00 AM at $101,000. Oil prices up with 5% which translates to 0.25 USD at the US pumps
All and all where in the past the economic reaction was knee jerking feet stayed on the ground. Firmly? We will find out..
Dreams to remember.....
Re: Major Economic Issues For Thailand
World Bank cuts Thailand's 2025 GDP growth outlook to 1.8% from 2.9%
https://www.reuters.com/world/asia-paci ... 025-07-03/
https://www.reuters.com/world/asia-paci ... 025-07-03/
Dreams to remember.....
Re: Major Economic Issues For Thailand
I think Chartchai Parasuks article in this mornings Bangkok Post about Thumps tariffs is worth copying in full. As it explans a lot.
He previously recommeded to the Thai negotiators to give Trump what he wants, which didn't go down well. He also advised them to not waffle on about Thailands historical support and co-operation with the US, stating it's not what the US wants to hear, but they did it anyway.
"I am terribly sorry for miscalculating the US's reciprocal tariff for Thailand at 35% in my previous article, when the actual rate imposed by Mr Trump on Monday was 36%.
This is the exact quote from my previous article: "Thailand, viewed as a Chinese exporting conduit, is likely to get a 35% reciprocal tariff to prevent further backdooring opportunities. The US negotiation team would tarnish its reputation by giving Thailand less than a 35% tax rate."
Oops. I am not wrong after all, as I specifically said "less than 35% tax rate."
The failure to recognise what the US really wants from the reciprocal tariff is the biggest mistake of the Thai negotiating team.
What the US really wants is to substantially reduce its trade deficit, which totalled US$918 billion in 2024. Of that amount, US$300 billion (9.8 trillion baht) was the deficit with China alone.
The problem is that the US does not only have a direct trade deficit with China. Craftily, China has shifted a substantial portion of its trade surplus with the US through "transshipments" via other countries.
According to my own estimate, transshipments via Vietnam and Thailand could account for at least US$30 billion and US$20 billion, respectively.
These transshipment countries will not be granted a lower reciprocal tariff than China's, which is tentatively set at 35%. If they were, the entire reciprocal tariff scheme would be ineffective, as China could simply reroute its products through other countries using transshipment.
Vietnam cleverly avoided such a high reciprocal tariff rate by splitting export products to the US into domestically produced goods and transshipments. The domestically produced products get a 20% levy, while the transshipped goods get a 40% levy.
Thailand has not offered such an option, as it wants to remain "impartial." Unfortunately, Mr Trump views "remaining impartial" as equivalent to "being non-cooperative." He has charged Thailand a 36% tariff, as if the country had never negotiated with the US.
I have heard a rumour that the US team has no intention of negotiating with Thailand, as the country has not fully addressed the transshipment issue. Negotiations are deemed unfruitful. The only reason the US team agreed to meet the Thai team is because the Thais hired a powerful lobbying firm to arrange the meeting.
President Trump has not shut all the doors.
Thailand can still submit a better proposal before the 36% rate takes effect on Aug 1. Even after that date, if Thailand comes up with a bright idea, Mr Trump will be willing to listen and reconsider the rate.
What might that bright idea be? The answer is the Vietnam model. Vietnam offered two straightforward deals to the US. The first was "total access" -- a 0% tariff on all US products.
It must be said that this particular offer was nothing new, as it had already been offered since April. More notably, the second deal involved separating transshipment products from domestically produced ones. The details of the separation method are not known.
In Thailand's case, a "Made in Thailand" certification must include at least 40% local content and must be registered with the Federation of Thai Industries (FTI), a professional association of investors and manufacturers.
A different local content requirement may have been used in the Vietnam–US deal to earn "Made in Vietnam" status.
Products certified as made in Vietnam would face a 20% import tax to the US, while other products would face a 40% rate.
The catch is that 40% is higher than the 35% import tax imposed on Chinese products. Therefore, there's no incentive for China to use Vietnam as a transshipment route. Problem solved.
Vietnam offered the 0% import tax to the US on April 7, immediately after Mr Trump announced a 46% levy on Vietnam.
The US gave a lukewarm response. This led me to believe that eliminating Vietnam's import tax was not the top priority.
The likely priority was the transshipment issue, which had caused the US–Vietnam trade deficit to balloon from US$70 billion to US123 billion within five years.
I want to point out that Vietnam is not a loser in this game. In fact, it could come out a winner. First, its products would be the cheapest among peers, as most countries have been given a reciprocal tariff of more than 20% by the US.
Second, the Vietnamese dong depreciating against the dollar will further boost competitiveness. Over the past year, the dong has depreciated by 2.02% against the dollar, while the Thai baht has appreciated by 10.84%.
Why can't we negotiate like Vietnam? Do we have an incompetent negotiating team or government? The answer is no. The Thai team did its best under unfavourable constraints.
First, Thailand heavily depends on exports to China, which amount to 6.7% of GDP.
Second, Thailand depends on tourism income from China, which probably adds another 1% to GDP. Upsetting China could cost Thailand 2% of GDP or more. Ignoring China doesn't seem like an option.
Have readers heard the song Torn Between Two Lovers by Mary MacGregor? It's a beautiful song. Thailand is caught between two giant powers, and we cannot avoid choosing sides. Yet being "impartial" is not a smart option.
If I could choose only one lover, it would be the US. The reasons are as follows:
Despite 6.7% of GDP in exports to China, we import 15.4% of GDP from China at the same time. That import figure is unrealistically high because it includes transshipped products.
Understand now why the transshipment issue is the main problem for the US?
The US can export more to Thailand, but the gain would be easily offset by transshipments.
Consider this: Thailand has a staggering trade deficit of 8.7% of GDP with China and a trade surplus of 6.6% of GDP with the US. It's probably a no-brainer which "lover" to choose -- the (very) rich one.
More important than trade figures is maintaining Thailand's industrial base and competitiveness. Thailand can barely compete with Vietnam, where wages and electricity costs are half of Thailand's.
If Vietnam's tax rate for US exports is nearly half -- 20% compared to Thailand's 36% -- it would be unwise to use Thailand as a production base.
Moreover, products could be manufactured in Vietnam and exported back to Thailand with zero tax under the Asean Free Trade Agreement.
This way, manufacturers can have the best of three worlds: low production costs, access to the Thai market, and expanded access to the US market.
One can expect a mass production exodus from Thailand to Vietnam. It's unrealistic to expect everyone to be kind and understanding -- especially someone like Mr Trump.
The US is on a mission to halve its trade deficits, even at substantial cost to others. Do not forget that the calculated reciprocal tariff rate for Thailand is actually 72%. Mr Trump only charged half of that -- 36%.
That is why he said: "Please understand that the 36% number is far less than what is needed to eliminate the trade deficit disparity we have with your country."
These were his exact words in the letter sent to the Thai prime minister on Monday. The Thai negotiation team is advised to take these words to heart and formulate an alternative trade plan for the US."
He previously recommeded to the Thai negotiators to give Trump what he wants, which didn't go down well. He also advised them to not waffle on about Thailands historical support and co-operation with the US, stating it's not what the US wants to hear, but they did it anyway.
"I am terribly sorry for miscalculating the US's reciprocal tariff for Thailand at 35% in my previous article, when the actual rate imposed by Mr Trump on Monday was 36%.
This is the exact quote from my previous article: "Thailand, viewed as a Chinese exporting conduit, is likely to get a 35% reciprocal tariff to prevent further backdooring opportunities. The US negotiation team would tarnish its reputation by giving Thailand less than a 35% tax rate."
Oops. I am not wrong after all, as I specifically said "less than 35% tax rate."
The failure to recognise what the US really wants from the reciprocal tariff is the biggest mistake of the Thai negotiating team.
What the US really wants is to substantially reduce its trade deficit, which totalled US$918 billion in 2024. Of that amount, US$300 billion (9.8 trillion baht) was the deficit with China alone.
The problem is that the US does not only have a direct trade deficit with China. Craftily, China has shifted a substantial portion of its trade surplus with the US through "transshipments" via other countries.
According to my own estimate, transshipments via Vietnam and Thailand could account for at least US$30 billion and US$20 billion, respectively.
These transshipment countries will not be granted a lower reciprocal tariff than China's, which is tentatively set at 35%. If they were, the entire reciprocal tariff scheme would be ineffective, as China could simply reroute its products through other countries using transshipment.
Vietnam cleverly avoided such a high reciprocal tariff rate by splitting export products to the US into domestically produced goods and transshipments. The domestically produced products get a 20% levy, while the transshipped goods get a 40% levy.
Thailand has not offered such an option, as it wants to remain "impartial." Unfortunately, Mr Trump views "remaining impartial" as equivalent to "being non-cooperative." He has charged Thailand a 36% tariff, as if the country had never negotiated with the US.
I have heard a rumour that the US team has no intention of negotiating with Thailand, as the country has not fully addressed the transshipment issue. Negotiations are deemed unfruitful. The only reason the US team agreed to meet the Thai team is because the Thais hired a powerful lobbying firm to arrange the meeting.
President Trump has not shut all the doors.
Thailand can still submit a better proposal before the 36% rate takes effect on Aug 1. Even after that date, if Thailand comes up with a bright idea, Mr Trump will be willing to listen and reconsider the rate.
What might that bright idea be? The answer is the Vietnam model. Vietnam offered two straightforward deals to the US. The first was "total access" -- a 0% tariff on all US products.
It must be said that this particular offer was nothing new, as it had already been offered since April. More notably, the second deal involved separating transshipment products from domestically produced ones. The details of the separation method are not known.
In Thailand's case, a "Made in Thailand" certification must include at least 40% local content and must be registered with the Federation of Thai Industries (FTI), a professional association of investors and manufacturers.
A different local content requirement may have been used in the Vietnam–US deal to earn "Made in Vietnam" status.
Products certified as made in Vietnam would face a 20% import tax to the US, while other products would face a 40% rate.
The catch is that 40% is higher than the 35% import tax imposed on Chinese products. Therefore, there's no incentive for China to use Vietnam as a transshipment route. Problem solved.
Vietnam offered the 0% import tax to the US on April 7, immediately after Mr Trump announced a 46% levy on Vietnam.
The US gave a lukewarm response. This led me to believe that eliminating Vietnam's import tax was not the top priority.
The likely priority was the transshipment issue, which had caused the US–Vietnam trade deficit to balloon from US$70 billion to US123 billion within five years.
I want to point out that Vietnam is not a loser in this game. In fact, it could come out a winner. First, its products would be the cheapest among peers, as most countries have been given a reciprocal tariff of more than 20% by the US.
Second, the Vietnamese dong depreciating against the dollar will further boost competitiveness. Over the past year, the dong has depreciated by 2.02% against the dollar, while the Thai baht has appreciated by 10.84%.
Why can't we negotiate like Vietnam? Do we have an incompetent negotiating team or government? The answer is no. The Thai team did its best under unfavourable constraints.
First, Thailand heavily depends on exports to China, which amount to 6.7% of GDP.
Second, Thailand depends on tourism income from China, which probably adds another 1% to GDP. Upsetting China could cost Thailand 2% of GDP or more. Ignoring China doesn't seem like an option.
Have readers heard the song Torn Between Two Lovers by Mary MacGregor? It's a beautiful song. Thailand is caught between two giant powers, and we cannot avoid choosing sides. Yet being "impartial" is not a smart option.
If I could choose only one lover, it would be the US. The reasons are as follows:
Despite 6.7% of GDP in exports to China, we import 15.4% of GDP from China at the same time. That import figure is unrealistically high because it includes transshipped products.
Understand now why the transshipment issue is the main problem for the US?
The US can export more to Thailand, but the gain would be easily offset by transshipments.
Consider this: Thailand has a staggering trade deficit of 8.7% of GDP with China and a trade surplus of 6.6% of GDP with the US. It's probably a no-brainer which "lover" to choose -- the (very) rich one.
More important than trade figures is maintaining Thailand's industrial base and competitiveness. Thailand can barely compete with Vietnam, where wages and electricity costs are half of Thailand's.
If Vietnam's tax rate for US exports is nearly half -- 20% compared to Thailand's 36% -- it would be unwise to use Thailand as a production base.
Moreover, products could be manufactured in Vietnam and exported back to Thailand with zero tax under the Asean Free Trade Agreement.
This way, manufacturers can have the best of three worlds: low production costs, access to the Thai market, and expanded access to the US market.
One can expect a mass production exodus from Thailand to Vietnam. It's unrealistic to expect everyone to be kind and understanding -- especially someone like Mr Trump.
The US is on a mission to halve its trade deficits, even at substantial cost to others. Do not forget that the calculated reciprocal tariff rate for Thailand is actually 72%. Mr Trump only charged half of that -- 36%.
That is why he said: "Please understand that the 36% number is far less than what is needed to eliminate the trade deficit disparity we have with your country."
These were his exact words in the letter sent to the Thai prime minister on Monday. The Thai negotiation team is advised to take these words to heart and formulate an alternative trade plan for the US."
Talk is cheap
Re: Major Economic Issues For Thailand
This guy should be the Thai Finance Minister, or maybe even the PM, to replace the pack of self-serving China sycophants currently running the show.
Who is the happier man, he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed? - Hunter S Thompson
Re: Major Economic Issues For Thailand
The idea is not too bad... My guess is that even he will not be able to change the issues, the bureaucrazy combined with limitiations of just one ministery (he needs majority back up in a country where to many bodies are involved with their own agenda)and external factors like tourism and global trade issues are an unforseeable factor
There were some good cabinet members before him, Korn being on of them (just my opinion).....they could not get it done as well, only when real majority rules you can see progression.
I found Thaksin to be a breath of fresh air, in the beginning, but we all know how that ended...
There were some good cabinet members before him, Korn being on of them (just my opinion).....they could not get it done as well, only when real majority rules you can see progression.
I found Thaksin to be a breath of fresh air, in the beginning, but we all know how that ended...
Dreams to remember.....