February 19, 2025
BANGKOK – Thailand, once a roaring Asian tiger economy, finds itself at a critical crossroads as it grapples with persistently sluggish growth that threatens to relegate it to the slow lane of Southeast Asian development.
With projected growth of just 2.8% for 2025, the kingdom faces mounting pressure to address structural challenges that have dampened its economic dynamism.
Growth forecasts paint sobering picture
The National Economic and Social Development Council (NESDC) projects Thailand’s economy will expand by 2.3-3.3% in 2025, with a median forecast of 2.8%.
While the Fiscal Policy Office (FPO) maintains a slightly more optimistic outlook of 3.0%, these figures stand in stark contrast to the robust growth of Thailand’s regional neighbours.
Vietnam, the region’s rising star, anticipates 6.6% growth in 2025, following a strong 6.4% expansion in 2024. The Philippines expects 6.2% growth, while Cambodia maintains a steady 6% trajectory. This disparity highlights Thailand’s increasing challenge in maintaining its competitive edge within Southeast Asia.
Structural challenges mount
The kingdom faces a complex web of domestic challenges that have created significant headwinds for economic revival.
Household debt has surged beyond 90% of GDP, severely constraining consumer spending power.
The situation is further complicated by hidden unemployment, widening income inequality, and declining private investment—a telling indicator of wavering confidence in the country’s economic prospects.
Private investment contracted by 1.6% in 2024, despite government efforts to stimulate the economy through increased public spending. This stands in marked contrast to Vietnam’s success in attracting foreign direct investment (FDI), securing over 369.7 billion baht in the first half of 2024 alone, primarily in electronics and semiconductor sectors.
Export recovery falls short
While Thai exports showed signs of recovery with 5.8% growth in 2024, forecasts suggest a slowdown to 3.5% in 2025 amid global market uncertainties.
This modest performance pales in comparison to Vietnam’s thriving export-oriented manufacturing sector, highlighting Thailand’s challenge in maintaining its competitive position in global markets.
Silver linings amid challenges
Despite these concerns, Thailand maintains several economic strengths. Inflation remains under control, expected to stay between 0.5% and 1.5% in 2025, following a modest 0.4% in 2024.
The current account continues to show resilience, with a projected surplus of 2.5% of GDP in 2025, up from 2.3% in 2024.
Private consumption, whilst growing at a reasonable pace—4.4% in 2024 and projected at 3.3% for 2025—has yet to emerge as a robust driver of economic growth.
The tourism sector offers some promise, with international arrivals expected to reach 36 million visitors, providing a vital boost to the economy.
The path forward
Thailand stands at what the Joint Standing Committee on Commerce, Industry, and Banking (JSSCIB) terms a “major turning point”. The government has outlined several initiatives to address these challenges, including:
- Accelerating budget disbursement, targeting 75% of the total investment budget
- Implementing debt restructuring measures for households and SMEs
- Boosting foreign direct investment through joint ventures benefiting local SMEs
- Enhancing tourist infrastructure and safety measures
Outlook and implications
The coming year will be crucial in determining whether Thailand can break free from its economic lethargy.
Success will require addressing fundamental structural issues, including:
- Modernising production capabilities
- Developing innovation capacity
- Upgrading education and workforce skills
- Building a sustainable welfare system
The decisions made now will determine whether Thailand reaches a transformative turning point or faces a more challenging “breaking point” with potentially lasting consequences for its economic future.
As global economic uncertainties persist, particularly surrounding US trade tariffs, Thailand’s ability to navigate these challenges while implementing crucial reforms will be critical in determining whether it can reclaim its position as one of Southeast Asia’s leading economies.