Economy loses steam in Q1

Momentum softens at start of 2025: GDP growth moderated to 3.1% year on year in the first quarter of 2025 from 3.3% in the fourth quarter of last year. Q1’s figure surprised markets on the upside. On a seasonally adjusted quarter-on-quarter basis, economic growth sped up to 0.7% in Q1 from the previous period's 0.4% growth.

Domestic sector weighs on Q1’s result: Softer domestic momentum chiefly drove the moderation in annual GDP growth. Household spending increased 2.6% in the first quarter, which was below the fourth quarter's 3.4% expansion. Persistently high household debt, subdued loan growth from commercial banks and rising economic uncertainty dampened the expansion. Additionally, public consumption growth was the slowest since Q2 2024, expanding 3.4% (Q4 2024: +5.4% yoy). Fixed investment growth waned to 4.7% in Q1, following 5.1% logged in the previous quarter; private investment contracted for the fourth consecutive quarter. On the external front, exports of goods and services growth sped up to 12.3% year on year in the first quarter, which marked the best reading since Q4 2021 (Q4 2024: +11.5% yoy). Conversely, imports of goods and services growth moderated to 2.1% in Q1 (Q4 2024: +8.2% yoy).

Economy to lose further steam by year-end: GDP growth is set to cool gradually through Q4 2025 as private investment and spending remain lackluster and rising global protectionism caps exports growth. As a result, the economy will lose steam from 2024 in 2025 as a whole, growing at one of the weakest paces in ASEAN. Stronger-than-expected monetary and fiscal stimulus poses an upside risk to economic growth, while weaker-than-expected external demand due to U.S. tariff hikes poses a downside risk.

Panelist insight: United Overseas Bank’s Enrico Tanuwidjaja and Sathit Talaengsatya said: “Looking ahead, Thailand’s economy is expected to grow at a slower pace, weighed down by subdued domestic and external demand amid ongoing global trade policy uncertainty and a weaker global outlook. While government spending—particularly public investment—and private consumption will continue to provide some support, private investment remains fragile due to negative sentiment and cyclical headwinds, despite a record FDI approval value by the BOI last year. Tighter financial conditions are also expected to constrain domestic demand.”

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