Thailand’s economy is entering a period of renewed uncertainty, even as early-year indicators briefly suggested momentum. Growth reached 3 percent in the first half of 2025—stronger than expected—thanks in part to a surge of export shipments sent out ahead of U.S. tariff increases. But according to the International Monetary Fund’s 2025 Article IV consultation, those gains are unlikely to last.

An IMF team led by Peter Breuer concluded its annual assessment in Bangkok on November 13, warning that Thailand is being squeezed between long-standing structural weaknesses, elevated household debt, and a fresh round of external shocks. As Breuer put it, “Thailand’s economy is facing mounting challenges. Long-standing structural challenges and pandemic scars, including elevated household debt, have weighed on growth for some time. These vulnerabilities are now being compounded by a new wave of shocks.”

The most immediate jolt comes from Washington. New U.S. tariffs—scaled back from an initially announced 36 percent to 19 percent—still represent a significant blow to Thai exporters. Tourism, typically the country’s most resilient economic engine, is also weakening. “Foreign tourist arrivals have declined,” Breuer noted. At home, a surprise change in government has added political uncertainty to the mix.

A Strong Start, a Softer Landing

The IMF’s analysis highlights a split-screen economy. The early part of 2025 benefited from temporary boosts: accelerated exports, a rebound in private investment after four quarters of contraction, and an unusual rise in public spending following budget delays in 2024.

But the Fund expects momentum to fade.

Breuer said: “Looking ahead, the Thai economy is expected to slow in the second half of 2025 and further in 2026. GDP growth is projected at 2.1 percent in 2025 and 1.6 percent in 2026.”

That deceleration reflects a reversal of export frontloading, slowing U.S. demand, the tariff impact, and tight financial conditions that are likely to suppress domestic spending. Meanwhile, inflation remains strikingly low. Headline inflation is projected at –0.1 percent in 2025 and 0.4 percent in 2026, returning to the central bank’s 1–3 percent target range only by 2027.

Risks Tilt to the Downside

The IMF frames the outlook as unusually fragile. Breuer warned that prolonged trade-policy uncertainty could further drag on growth and push inflation lower for longer. That scenario carries its own dangers: “A prolonged decline in inflation could lower inflation expectations and lead to a broad-based and sustained decline in the price level.”

Global financial volatility, regional geopolitical tensions, and domestic political uncertainty all represent additional risks. Still, the Fund acknowledges some potential bright spots: an easing of global trade tensions, stronger growth among Thailand’s trading partners, or faster resolution of political uncertainty could all help lift the economy.

Policy Options Narrow

With public debt elevated, Thailand has limited room to maneuver. The Fund recommends that any fiscal expansion be modest, targeted, and efficiently executed. Current plans—redirecting the much-debated Digital Wallet universal cash handout toward investment projects and boosting State Welfare Card support—are seen as sensible uses of scarce resources.

Breuer emphasized discipline: “Absent severe downside shocks, the authorities should avoid further delaying fiscal adjustment or raising the debt ceiling and instead proceed with growth-friendly, revenue-driven consolidation to contain debt accumulation.”

On the monetary side, Thailand has already cut interest rates four times since October 2024, bringing the policy rate to 1.5 percent. According to the IMF, more easing may be needed. With inflation subdued and demand softening, further cuts could help cushion the slowdown—though the Fund stresses the importance of retaining “adequate policy space” should new shocks emerge.

Close fiscal-monetary coordination will be crucial, Breuer said, alongside protecting the Bank of Thailand’s independence and keeping the exchange rate flexible as a shock absorber.

The Debt Overhang and SMEs

Household debt remains one of Thailand’s most persistent vulnerabilities. Authorities have recently introduced programs to restructure low-value unsecured loans and help borrowers re-enter the formal credit system after partial repayment. The IMF supports these moves but highlights the need for strict oversight.

SMEs—long considered the backbone of the Thai economy—also need greater access to credit. The Fund argues that expanding financial services to underserved businesses will improve overall economic resilience.

A Call for Structural Reform

Beyond short-term stimulus and rate adjustments, the IMF says Thailand must confront deeper issues. Breuer laid out a long structural agenda: deepening trade integration, upgrading industrial sophistication, improving labor productivity, advancing social protection, enhancing governance, and strengthening climate resilience. These reforms, the Fund argues, are essential to revitalize long-term growth and ensure more inclusive prosperity.

The Article IV mission included extensive meetings with government ministries, the Bank of Thailand, public agencies, civil society organizations, and private-sector representatives. The IMF Executive Board is expected to review the final report in February 2026.

For now, the IMF’s message is clear: Thailand’s economy is still growing, but the buffers are thinner, the risks heavier, and the margin for policy missteps smaller than in years past.