Maybank drops Thailand’s GDP growth forecast amid export and manufacturing slump

Maybank IBG Research has revised downwards its GDP growth forecast for Thailand, for both the current year and 2025. The downgraded estimates are due to a combination of factors, including a faltering export outlook, a deepening manufacturing slump, an uneven recovery in tourism, and limited chances of interest rate cuts by the Bank of Thailand this year.

For this year, Maybank now predicts a GDP growth of 2.4%, down from an initial 2.9%. For 2025, the forecast has been lowered to 2.8% from the previously projected 3%. These revisions reflect the impact of a struggling manufacturing sector on the nation’s growth.

“First-quarter growth is expected to be a mere 1%, in line with the central bank’s prediction, burdened by decreasing government expenditure,” Erica Tay, Director of Macro Research at Maybank, reported.

The recent royal approval of the fiscal budget may see a surge in public spending from mid-year onwards, potentially pushing growth to 3.3% in the second half of the year, Maybank’s research unit suggests.

However, despite these deteriorating fundamentals, the window for the Bank of Thailand to ease rates this year is narrowing due to external developments in financial markets, according to Maybank.

“It is more likely than not that the central bank will maintain rates at 2.50% in its next meeting in June,” Tay added.

GDP growth

Maybank also noted that Thailand’s industrial production has declined for the 18th consecutive month, with a year-on-year drop of 5.1% in March. This figure is significantly worse than the consensus of a 1.9% drop and follows a contraction of 2.8% in February.

Across the board, production has plummeted, led by the automotive industry (-22.1%), semiconductors (-15.3%), appliances (-4.5%), and cement and construction materials (-9.9%). Domestic-oriented manufacturing clusters have experienced less severe drops compared to those focused on exports.

Data from the Bank of Thailand reveals that private consumption fell by 0.6% year-on-year in March and increased by only 1.6% in the first quarter, contrasting starkly with the 6.7% growth observed last year.

Maybank also warned of the challenges faced by the auto production sector for the rest of the year, including softer domestic demand and intense competition from Chinese electric vehicles in the export market.

Bank of America’s BofA Securities noted a decline in the number of international flight arrivals, excluding those from China, Taiwan, and Hong Kong, from 393 flights per day in March to 385 in April, reported Bangkok Post.

Maybank identified a key risk to their forecast in the recovery of Chinese tourist arrivals, as other nations have almost returned to their pre-Covid-19 levels.