GDP growth falls to one-year low in Q2

Economy loses steam but beats market expectations: GDP growth slowed to 2.8% year on year in the second quarter, down from 3.2% in the first quarter and marking the worst result since Q2 2024, due to a decelerating domestic demand. Still, the expansion was stronger than markets had expected, partly due to a resilient external sector. On a seasonally adjusted quarter-on-quarter basis, economic growth slowed to 0.6% in Q2, from the previous quarter's 0.7% increase.

Domestic demand eases in Q2: Domestic demand grew in Q2 at the slowest rate in a year, fueling the moderation in annual GDP growth. Household spending rose 2.1% year on year in Q2, down from a 2.5% expansion in Q1. Moreover, government consumption growth fell to 2.2% in Q2 (Q1: +3.4% yoy), while fixed investment growth picked up to 5.8% from a 4.7% increase in Q1. On the external front, exports of goods and services largely maintained Q1’s momentum—despite global trade uncertainty—and rose 12.2% on an annual basis in the second quarter, which was close to the first quarter's 12.3% expansion. An acceleration in goods exports, likely due to shipment frontloading ahead of U.S. tariff hikes, largely compensated for a sharp slowdown in services exports, reflecting a cooling tourism sector. Conversely, imports of goods and services growth sped up to 10.8% in Q2 (Q1: +2.1% yoy), marking the highest reading since Q4 2021.

Panelist insight: United Overseas Bank’s Enrico Tanuwidjaja and Sathit Talaengsatya said: “The composition of growth is set to pivot toward domestic engines—principally public investment and selective private demand—while external demand (goods exports and tourism) softens as front-loading fades and tariff headwinds intensify.” EIU analysts commented: “We expect Thailand’s GDP in the second half of the year to slow significantly to average below 1% year on year as a result of the tapering of front-loading activities. […] On the domestic demand front, the prolonged political wrangling and border conflicts with Cambodia will keep business and consumer confidence tepid, suppressing growth in investment and consumption.”

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