The government set an ambitious target, aiming to increase GDP growth to a range of 3-3.5% this year, banking on tourism, foreign investment and state stimulus measures, reports the Bangkok Post.
Yet many industries are sceptical about this goal as tourism slows with the low season approaching. Foreign direct investment (FDI) has not reached anticipated levels, while the government’s B10,000 cash handout was widely criticised by analysts as a feeble attempt to generate economic momentum.
DIFFICULT YEAR
The public and private sectors will face uphill tasks in driving GDP growth in 2025 as the economy grapples with both internal and external challenges, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI).
The country continues to struggle with a high level of household debt, hampering many business sectors such as automotive, while the US-China trade war could have an adverse impact on Thailand, he said.
Given this backdrop, the Joint Standing Committee on Commerce, Industry and Banking projected GDP growth in a range of 2.4-2.9% this year.
“We don’t expect GDP growth to exceed 2.9%,” said Mr Kriengkrai.
The FTI’s Automotive Industry Club predicts Thailand’s car manufacturing output will remain unchanged at 1.5 million vehicles this year, equal to the level last year, as banks and car financing companies maintain strict lending criteria to avoid non-performing loans.
Financiers are concerned about a household debt-to-GDP ratio of 90% as of last year’s third quarter.
Other industries are worried about the influx of low-cost Chinese imports into Southeast Asia, as China faces new tariffs imposed by US President Donald Trump earlier this month.
Washington slapped an additional 10% tariff on Chinese products on Feb 4, drawing countermeasures from Beijing, which include a 15% tariff on imports of US coal and liquefied natural gas.
The tit for tat between the world’s two largest economies could prompt Chinese firms to reroute their exports to Southeast Asia, said Mr Kriengkrai. This means Chinese products, some of them low-quality, may flood the region’s market, he said.
Thailand’s market share in Southeast Asia has already decreased because it cannot compete with inexpensive products from China, said Mr Kriengkrai. An FTI report found 25 Thai industries have been affected and the number is expected to increase to 30 this year, he said.
“However, we still have a positive outlook for the economy, with a growth projection of 2.4-2.9%, export gain of 1.5-2.5% and inflation of 0.8-1.2%,” said Mr Kriengkrai.
To expand GDP, he said entrepreneurs cannot solely act as original equipment manufacturers, making products for other brands. They need to adopt modern technologies to become original design producers, designing and making products for other companies.
“They also need to learn how to be original brand manufacturers who make and sell products under their own brands in order to add value to their products,” said Mr Kriengkrai.
Somnuek Tanthathoedtham, managing director of property developer N.C. Housing Plc, said the first half of 2025 is a period of market adjustment for the property sector following last year’s slowdown.
“The residential sector faced significant challenges across all segments last year, starting with the mid- to lower-end segment, before spreading to the upper-end segment,” he said. “Economic growth also fell short of expectations.”
Mr Somnuek said the tourism sector may improve, but economic recovery still depends on timely government spending to enhance liquidity in the system.
“With purchasing power still under pressure, the property sector is expected to have a gradual recovery in the second half,” he said.
Mr Somnuek said many developers adjusted last year and several emerging trends became normalised, such as banks’ mortgage rejection rates rising to 40-50% from 20%.
“Developers must reevaluate and adjust their business strategies to align with market purchasing power, while adopting effective marketing measures to support themselves,” he said.
ACHIEVABLE WITH CONDITIONS
Thienprasit Chaiyapatranun, president of the Thai Hotels Association, said the target of 3.5% GDP growth is similar to the ambitious government goal for tourism revenue of N3.5 trillion, up from B2.62trn last year.
He said the GDP target is quite challenging amid current economic conditions. The government has a lot of hard work to do, but should be able to create more effective tools to reach these goals, said Mr Thienprasit.
However, he cautioned a heavy reliance on tourism would be difficult as the low season looms.
Bill Barnett, managing director of hospitality consultancy C9 Hotelworks, said 3.5% GDP growth is achievable, bolstered by the tourism industry, particularly Asian markets.
He said geopolitical conflicts and global migration trends would drive foreigners to look for a second home in Thailand as the country offers several long-term visa schemes and is well-equipped with components for families, such as international schools.
However, to sustainably grow the tourism industry, the government should prioritise improving infrastructure, outlining a master plan and proper zoning for the whole country, said Mr Barnett.
Wutthiphum Jurangkool, chief executive of Nok Air, said the B10,000 handout for the elderly is expected to lift the economy to a certain level, but would not significantly benefit the travel industry as recipients are likely to pay for necessities rather than leisure.
He said if the foreign exchange rate and fuel prices do not fluctuate much, the airline’s expenses and airfares should stabilise, which could eventually encourage more people to take trips.