The ongoing trade tensions between the United States and Thailand are causing significant concern for the Thai economy as the Federation of Thai Industries (FTI) has revised its growth forecast for 2025 down to between 2.0% and 2.2%. This is a decrease from earlier predictions of 2.4% to 2.9%. The primary reason for this adjustment is the anticipated impact of U.S. tariffs on Thai exports, particularly if the tariffs are raised to 36% in the latter half of the year.
Mr. Kriengkrai Thiennukul, the Chairman of the FTI, expressed alarm during a recent meeting of the Joint Private Sector Committee, emphasizing the potential repercussions of the U.S. tariffs. If Thailand is subjected to a 10% retaliatory tariff, the FTI estimates that export growth could be limited to just 0.3% to 0.9%, a significant drop from the previous estimate of 1.5% to 2.5%. In a more severe scenario where tariffs rise to 36%, GDP growth could plummet to between 0.7% and 1.4%, with exports potentially contracting by as much as 2%.
The International Monetary Fund (IMF) has also adjusted its global growth forecast for 2025, reducing it from 3.3% to 2.8%. The IMF warns that trade barriers could restrict global trade growth to a mere 1.7%, a level not seen since the European crisis of 2011. This context highlights the fragility of the global economy and underscores the urgency for Thailand to negotiate with the U.S. to reduce tariffs.
"The trade war is exerting pressure on the global economy, which is expected to grow below expectations in 2025," Mr. Thiennukul stated, emphasizing the need for Thailand to enhance its competitive capabilities in an increasingly challenging market. He noted that the potential revenue loss from these tariffs could reach a staggering 1.6 trillion baht over the next five years.
In light of these developments, the FTI has called on the Thai government to engage in proactive discussions with the U.S. to mitigate the impact of these tariffs. The organization is also advocating for measures to protect local businesses from the effects of increased imports resulting from trade diversions.
Furthermore, the FTI is promoting the use of digital systems to streamline customs procedures and enhance the efficiency of trade operations. This initiative aims to address the challenges posed by trade diversion and ensure that Thai goods remain competitive in international markets.
As part of its strategy, the FTI is closely monitoring the exchange rate, which has recently strengthened to around 32.5 to 32.7 baht per dollar. This appreciation poses additional challenges for Thai exporters, as a stronger currency can make exports less competitive. Mr. Thiennukul urged the government to manage the currency more effectively to avoid rapid fluctuations that could harm the economy.
Amid these economic challenges, the Thai government is also reviewing bankruptcy legislation that aims to streamline the restructuring process for small and medium-sized enterprises (SMEs). This legislation is expected to have significant implications for businesses with debts under 50 million baht, potentially altering the landscape for financial responsibility and credit access.
"We must ensure that any changes to the law protect the rights of all stakeholders and do not inadvertently destabilize the economy," Mr. Thiennukul cautioned, highlighting the need for thorough analysis and consideration of the potential impacts.
In conclusion, the FTI's revised economic projections reflect the growing uncertainties stemming from international trade tensions and domestic economic factors. As Thailand navigates these challenges, the focus remains on fostering resilient trade relationships and ensuring the competitiveness of its industries in the global market.
