BANGKOK — Thailand’s Monetary Policy Committee (MPC) voted 6-1 to keep the country’s benchmark interest rate unchanged at 1.75 percent on Wdnesday, despite growing concerns about the economic outlook and mounting pressure from trade policy uncertainties.
The decision comes as Thailand’s economy faces a complex mix of near-term resilience and medium-term challenges, with exports driving current growth but facing headwinds from potential U.S. tariffs and geopolitical tensions.
Economic Growth Outpaces Expectations
Thailand’s economy expanded more robustly than anticipated in the first half of 2025, driven primarily by strong manufacturing production and front-loaded exports. The central bank projects economic growth of 2.3 percent for 2025, up from earlier estimates, partly due to stronger-than-expected first quarter performance.
“Export growth, particularly in electronics and front-loaded goods to the U.S., has supported manufacturing and related-service sectors,” said Sakkapop Panyanukul, Secretary of the Monetary Policy Committee, announcing the decision.
However, the bank expects growth to decelerate significantly in the second half of the year, with the economy projected to expand by just 1.7 percent in 2026 as export momentum fades and domestic consumption weakens.
Trade Policy Risks Cloud Outlook
The committee cited increasing risks to merchandise exports stemming from U.S. trade policies as a key concern for the economic outlook. The potential for higher U.S. tariffs has already prompted some companies to accelerate shipments, contributing to current export strength but potentially undermining future performance.
Private consumption is also expected to moderate as income growth slows and consumer confidence weakens. The central bank has revised down its projections for tourist arrivals, though tourism receipts continue to expand due to higher per-visitor spending.
Inflation Remains Subdued
Headline inflation is projected to remain well below the central bank’s target range, at just 0.5 percent in 2025 and 0.8 percent in 2026, primarily due to lower energy and fresh food prices. Core inflation is expected to reach 1.0 percent this year and 0.9 percent next year.
Despite the low inflation environment, the committee noted that medium-term inflation expectations remain anchored within the target range, and the current low levels reflect supply-side factors rather than broad-based deflationary pressures.
Credit Conditions Tighten
Financial conditions present another challenge, with overall credit growth remaining negative as banks exercise caution in lending, particularly to small and medium enterprises and low-income households. Credit quality has continued to deteriorate, especially in SME and housing loans.
The committee highlighted that part of the credit contraction stems from subdued business demand and increased loan repayment, while financial institutions remain cautious about extending new credit given rising risks.
Dissenting Voice Calls for Rate Cut
One committee member voted to reduce the policy rate by 0.25 percentage points to 1.50 percent, arguing that a cut would help alleviate interest rate burdens and support economic adjustment for those affected by the weakening outlook.
However, the majority of committee members prioritized maintaining the current rate, emphasizing the importance of timing and effectiveness of monetary policy amid high uncertainties and limited policy space.
Policy Stance Remains Flexible
The central bank stressed that monetary policy should remain accommodative to support the economy going forward, noting that previous rate cuts have already provided some cushion against prevailing risks.
“The Committee assesses the economic outlook to remain highly uncertain and stands ready to adjust monetary policy going forward to align with the economic and inflation outlook and associated risks,” the statement said.
The Thai baht has appreciated slightly against the U.S. dollar, driven by external factors and moving in line with regional currencies. The committee said it would continue to closely monitor credit growth and credit quality, which could have implications for broader economic activities.
The decision reflects the central bank’s cautious approach to balancing growth support with financial stability concerns, as Thailand navigates an increasingly complex global economic environment marked by trade tensions and domestic structural challenges.
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