Thailand’s economy stumbles as growth slows to 2.5%—manufacturing slump and weak spending to blame. Officials warn of downside risks despite a tourism boost. EV confusion, job losses, and falling investment deepen economic woes as 2025 uncertainty looms.
There was bad news for the economy on Thursday as government officials suggested that fourth-quarter growth in 2024 had disappointed. At length, the Finance Minister suggested a full-year growth rate of only 2.5%, while central bank governor Sethaput Suthiwartnarueput warned that an earlier 2.7% figure risked a downside. Top officials suggested that a sharp drop in manufacturing output was behind the problem. At the same time, private consumption cooled despite the first tranche of the government’s ฿500 billion giveaway programme at the end of September 2024
Thailand’s economy appears to have sputtered in the last quarter of 2024. Both the Bank of Thailand and the Ministry of Finance confirmed this on Thursday.
It appears that the economy only grew by 3% in the last three months. This came despite a strong rise in foreign tourists and the first-stage impact of a government giveaway.
The main culprit, however, for the disappointing economic data is a tightening of consumer spending. This took place in late September when 3.17 million of the most vulnerable in Thailand received the ฿10,000 handout.
Concerns grow over manufacturing despite rising tourism and increased government stimulus efforts
This is concerning news since it raises concerns about the manufacturing sector, previously the base of Thailand’s economy. Especially so given that foreign tourist numbers rose by 25% from 2023 to over 35 million visitors. At the same time, income generated rose from ฿1.2 billion to ฿1.6 billion.
In particular, government spokespeople zeroed in on a massive 20% dive in automobile production over the course of 2024. Certainly, this was attributed to a tightening of credit for vehicles. In addition, a marked decline in export demand was noted.
Nonetheless, although officials are reluctant to admit it, a key factor has been market confusion caused by government policies aimed at transitioning to EV vehicles. Despite massive investments and government subsidies, sales of EV cars in Thailand fell by 5.77% in 2024.
In short, the economy has lost ground in both directions. Certainly, even Pornchai Thiraveja of the Fiscal Policy Office of the Ministry of Finance on Thursday alluded to problems within the nation’s car manufacturing sector.
Shift to EVs impacts traditional auto industry, leading to declining sales and reduced local production
Previously, Thailand had been dubbed the Motown of Southeast Asia due to its strong automobile production base, as evidenced by large Japanese firms such as Toyota and Honda.
Nonetheless, the government-driven program to transition to EV cars has damaged the country’s auto part manufacturing sector. Certainly, both imported Chinese EVs and those assembled in Thailand do not use domestically manufactured parts.
Simultaneously, confusion in the market among consumers and a credit crunch orchestrated by the Bank of Thailand saw overall car sales plummet by a massive 26.15%.
At the same time, sales of EVs were down by 5.77% from 2023 with the industry registering just 71,909 units, compared to 76,314 units the previous year. Meanwhile, overall only 572,615 cars were registered.
Consequently, private investment in 2024 fell by 2.7%. This is a problem for the Thai government, which insists it will grow by 2.7% in 2025. However, small Thai manufacturing firms are being shuttered by massive product dumping and other encroachments from China.
Rising unemployment and falling investment highlight growing challenges for Thailand’s economic recovery
Unfortunately, unemployment within the recorded or legitimate economy is rising. Previously, unemployment is something unheard of in Thailand, but it grew to 1% in the third quarter to 413,910. This is expected to have risen in the fourth quarter and is further projected to rise in 2025.
In brief, Thailand’s manufacturing economy is stalling.
On Thursday, Mr. Pornchai suggested that Thailand’s GDP could grow by 3.5% in 2025. He suggested a 3% base, although the ministry at the same time confirmed a 2.5% growth rate for 2024. This has previously been reported as being optimistically set at 2.7%.
The senior officials mentioned higher foreign direct investment, in particular, a new data centre development by TikTok owner ByteDance. This is expected to inject $3.8 billion into the economy. This comes alongside similar commitments from both Google and Amazon Web Services.
Foreign investment offers hope, but uncertainty remains over tourism and economic policy direction
At the same time, the minister was forced to concede that foreign tourist numbers are also in play. Projections may be trimmed. Previously, it was projected that there would be 39 million visitors, but now, due to security concerns in China, it’s down to 38.5 million. Certainly, Thailand has yet to recover from its pre-pandemic high of 39.8 million in 2019.
Nevertheless, Mr. Pornchai remained bullish: “Growth can reach 3.5% from a base of 3.0% if we push,” he insisted. In addition, he assured reporters that government investment spending would be increased in 2025.
Hours later, in an interview released with Reuters, Bank of Thailand boss Sethaput Suthiwartnarueput was more cautious. He suggested that the government’s ฿10,000 giveaway had somewhat disappointed in its ability to boost consumption.
At length, he supposed many people used the money to pay down debt. At the same time, he held out hope for a 2.7% rise in GDP when the National Economic and Social Development Council (NESDC) releases its official data on February 17. Nonetheless, he was careful to hedge his view.
“I have to say that there is some downside risk to that figure,” he said.
Economic slowdown traces back to US-China trade war, pandemic fallout, and ongoing global uncertainties
Thailand’s economy grew by 1.9% in 2023. Indeed, this was down from 2.6% in 2022. Before that, the growth figure was only 1.6% in 2021. This came after a massive 6.1% contraction due to the pandemic in 2020.
Many analysts suggest that Thailand’s economic malaise set in after the beginning of the US-China trade war in 2017. Subsequently, the pandemic killed off many small firms and operated within the black economy.
Undoubtedly, the malaise in the Chinese economy is feeding itself into Thailand. This comes as economic observers increasingly dissect Chinese economic data with real evidence suggesting a contraction at least to the extent of stagnation or perhaps worse.
Meanwhile, Thailand looks forward to 2025 with some trepidation. Industry leaders assert that whatever US President Donald Trump’s administration introduces or changes may impact the kingdom in the second half of 2025.
Former PM Thaksin warns economic troubles are worse than 1997 crisis as structural issues remain unresolved
Despite the government’s assurances and efforts to revive the Thai economy, it is facing an extremely challenging situation. Speaking last weekend in Si Sa Ket, former Prime Minister Thaksin Shinawatra explained it well.
He described the current malaise as more serious than the 1997 Asian Financial Crisis.
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At that time, he said it was only a matter of re-aligning the Bangkok-centric economy. This, he said, was akin to putting a new roof on a house. However, today, he said Thailand’s economy was sinking from the bottom down. Mr. Thaksin warned that if the foundations are not reinforced, the building itself may topple.
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Further reading:
Chinese and Thai economies both feeling the pinch even before Trump gets to work in the White House
Economy sees sharp setback with lower private spending, investment and foreign tourism income
Trump’s trifecta triumph means Thailand will be more on edge as he prepares to take power in January
Ung Ing congratulates Trump as Thailand uneasily confronts the meaning of his second Presidency
