KKP Research has revised its forecast for Thailand's GDP due to both external and internal pressures. Externally, uncertainty in U.S. trade policy, including potential tariff hikes, impacts Thailand’s export sector and deters consumption and investment decisions. Internally, excluding tourism, Thailand’s economy is effectively in recession.

Thailand’s economic contraction began in Q4 2022 and has hovered near 0% growth over the past two quarters. All three main economic drivers are faltering:

  1. Tourism: Growth in this sector has slowed significantly, particularly due to the absence of Chinese tourists, many of whom now prefer other destinations like Japan. While 36.2 million visitors are expected in 2025, that’s only 600,000 more than last year—a marginal increase.
  2. Industry: Structural issues continue to weigh down industrial output, which has contracted since 2022. The U.S. tariff announcement further complicates recovery prospects, directly affecting Thai exports to the U.S.
  3. Agriculture: The sector shows signs of decline, especially with white rice exports falling nearly 30% in Q1 2025 due to India’s re-entry into the market. Slowed agricultural income dampens domestic consumption.

Three negative impacts of U.S. trade policy uncertainty are highlighted:

  • A direct impact: A 10% tariff on Thai exports could shrink GDP by 0.15%.
  • Negotiation fallout: U.S. demands to open Thailand’s agricultural market (especially pork, beef, and dairy) could disrupt local production. Agriculture, while just 8-9% of GDP, accounts for over 31% of total rural employment.
  • Global slowdown: A 1% global GDP dip tends to reduce Thai GDP by around 0.6%.

To return to a 3% growth path, Thailand would need one of the following:

  • Tourism: Expand by 7–10 million tourists per year, reaching 70 million by 2030.
  • Industry: Manufacturing must grow 5% annually, like in the early 2000s—difficult, as post-COVID growth averaged -0.59%.
  • Agriculture: The sector is too small (8% of GDP) and non-competitive in key exports like rice.

Further challenges include weakening external demand, rising bad loans in the banking sector, persistent household debt, and high interest rates that hinder credit growth.