The Bank of Thailand announced a rate cut on Wednesday, aligning with widespread expectations, to bolster an economy facing multiple challenges, including political instability, a strengthening baht, and US trade tariffs.
The Monetary Policy Committee (MPC) unanimously decided to lower the one-day repurchase rate by 25 basis points to 1.25% in its final meeting of the year. This marks the fifth consecutive reduction since October 2024, totaling a decrease of 125 basis points.
According to a Reuters survey of 23 economists, 13 anticipate the policy rate will decline further to 1.00% in early 2026, while the remaining 10 expect it to remain at 1.25%.
The National Economic and Social Development Council (NESDC) forecasts Thailand’s GDP growth will slow to 1.7% in 2024, down from an estimated 2% this year. In the third quarter, the economy grew just 1.2% year-on-year after expanding by 2.8% in the second quarter, with fourth-quarter growth expected to fall below 1%.
The Bank projects continued moderation in economic growth for 2026 and 2027, following the slowdown in the first half of 2025. They anticipate growth of 1.5% in 2026, rising to 2.3% in 2027.
The slowing in the economy during the latter half of this year has been attributed to temporary factors such as manufacturing sector disruptions, reduced short-haul tourism, and flooding in the South, which is expected to have lingering effects into early next year.
The bank also highlighted that private consumption is expected to weaken in line with income levels, and merchandise exports are facing impacts from US trade policies. However, tourism is forecasted to gradually recover.
Given the subdued economic activity, demand-driven inflation remains limited, with credit contraction continuing and credit quality among vulnerable borrowers deteriorating. Small businesses are struggling with liquidity issues due to limited access to credit and a stronger baht.
The Thai baht traded around 31.53 to the US dollar on Wednesday afternoon, close to a four-year high, with little change from the previous day.
The MPC remarked that, considering the economic slowdown and increased risks, a more accommodative monetary policy would help support financial conditions, facilitate economic recovery, reduce debt burdens for vulnerable groups, and complement other government measures.
The Bank of Thailand expects inflation to stay below its 1-3% target over the long term, projecting averages of -0.1% in 2025, 0.3% in 2026, and 1.0% in 2027.