Thai economy's competitiveness is declining, central bank warns
The Bank of Thailand logo is pictured in Bangkok, Thailand, January 30, 2025. REUTERS/Chalinee Thirasupa
BANGKOK, Jan 7 : Thailand's central bank said on Wednesday the economy is facing challenges, including a sustained decline in competitiveness, with exports expected to be negatively affected by U.S. tariffs and the persistently overvalued baht.
Southeast Asia's second-largest economy has been struggling with an appreciating currency, U.S. tariffs, high household debt, a border conflict with Cambodia and political uncertainty ahead of elections in early February.
"This year there is a lot of uncertainty," said Bank of Thailand deputy governor Piti Disyatat.
"Policy room is low, but that doesn't mean there is none," he told reporters. "If we think it is necessary then it will be used."
In a report released ahead of a policy forum, the Bank of Thailand said that GDP growth in the second half of last year is expected to have reached 1.3 per cent year-on-year, with exports up 9.1 per cent over the period.
The headline consumer price index dropped 0.28 per cent in December from a year earlier, following an annual fall of 0.49 per cent in the previous month, the commerce ministry said on Wednesday, to remain well below the central bank's inflation target range of 1 per cent to 3 per cent.
Core CPI, which excludes volatile energy and fresh food prices, rose 0.59 per cent in December from a year earlier.
According to figures from the trade ministry, the headline CPI dipped 0.14 per cent over 2025 compared to a year earlier, dragged down by lower fuel and electricity prices. The ministry said it expected headline inflation to be in a range of -0.5 per cent to 1 per cent in the first quarter of 2026 and at 0.0 per cent to 1.0 per cent for the year as a whole.
The central bank said medium-term inflation expectations were still anchored within the 1 per cent to 3 per cent target range, but said the possibility of deflation could not be ruled out.
"At this time, we think there is no deflation risk," said Sakkapop Panyanakul, director of the bank's Monetary Policy Group. "We are not seeing it yet, but it is an issue that must be monitored."
The central bank also said the strong baht was tightening liquidity for small- to medium-sized exporters, which is weighing on shipments. The currency gained more than 10 per cent against the dollar last year.
On Tuesday, the BOT's Piti told the Reuters Global Markets Forum that economic growth was expected to have turned positive in the fourth quarter of 2025, and he expected last year's growth forecast of 2.2 per cent would be met.
