Thailand’s central bank cuts rate again; economy could face recession as US tariffs loom

Thailand’s central bank cut its key interest rate by a quarter point for a second consecutive meeting on Wednesday (Apr 30), in a move to support an underperforming economy facing uncertainty over steep US tariffs.

The Bank of Thailand’s (BOT) monetary policy committee voted 5-2 to reduce the one-day repurchase rate by 25 basis points to 1.75 per cent, the lowest level in two years. That followed a similar reduction at the previous meeting in February.

The central bank on Wednesday cut its growth forecast for 2025 to 2 per cent, down from just above 2.5 per cent seen in February and 2.9 per cent predicted in December.

It said there were downside risks to growth and US trade tariffs could weigh in the second half of the year, and if the trade war escalated, then growth could be just 1.3 per cent this year.

Growth next year was seen at 1.8 per cent in the central bank’s “reference” scenario and 1 per cent in its worst-case scenario.

“The US trade policies and potential retaliations from major economies will cause significant changes in the global economic, financial, and trade landscape,” it said in a statement.

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“This process is only beginning and subject to high uncertainties, with the global economy likely to grow at a slower pace. The situation is expected to be prolonged.”

There is still monetary policy room, but not much, to support the economy, assistant governor Sakkapop Panyanukul told a press conference.

“The monetary policy stance has changed. We are now in a period of easing,” he said.

“Our outlook has weakened, and there are risks. Therefore, the monetary policy stance will be more accommodative.”

There is a chance that the economy could slip into a technical recession, he added. The next rate meeting is on Jun 25.

A “technical recession” is commonly defined as two consecutive quarters of shrinkage in economic growth.

South-east Asia’s second-largest economy has lagged regional peers for years, growing just 2.5 per cent last year.

Inflation, tourism forecasts lowered

Twenty of 28 economists in a Reuters poll had predicted the key rate would be cut this week. The other eight had expected no policy change.

The central bank also said it would closely monitor the baht currency, which rose as much as 0.4 per cent after the rate decision, while the main stock index gained 2 per cent. Despite the trade fears and sluggish economic demand, the baht has still gained nearly 3 per cent this year as the US dollar faltered.

Reflecting growing risks, the BOT lowered its 2025 headline inflation forecast to 0.5 per cent, down from 1.1 per cent seen in December and below its target range of 1 to 3 per cent. It predicted core inflation at 0.9 per cent this year versus 1.0 per cent seen earlier.

The BOT cut its export growth forecast to 0.8 per cent this year from 2.7 per cent seen previously.

The central bank reduced its projections for foreign tourist arrivals – a key growth engine – to 37.5 million this year, from 39.5 million seen in December.

“We think today’s easing will be the last for the foreseeable future as the MPC (monetary policy committee) likely will adopt a wait-and-see approach with regards to the lingering tariff uncertainty,” said Miguel Chanco, an economist at Pantheon Macroeconomics. REUTERS