Thailand's central bank to lower interest rates on August 13, as suggested by our poll, to bolster the country's economy.
Thai Central Bank Cuts Interest Rate to Boost Slow Economy
The Bank of Thailand (BOT) has lowered its key interest rate by 25 basis points to 1.50% on August 13, 2025, in an effort to stimulate a slowing economy. This is the fourth rate cut in 10 months, aiming to provide an accommodative monetary policy to counter structural economic challenges and weakening competitiveness affecting small businesses.
Reasons for the Rate Cut
The Thai economy is currently facing negative inflation for several consecutive months, reducing pricing pressures and consumer spending. U.S. trade policies and tariffs have worsened structural problems, weakening Thailand's export competitiveness and affecting growth prospects. Private consumption contracted by 0.3% in June, and exports fell by nearly 5% from the previous month, indicating economic softness. Concerns over declining short-haul tourist arrivals due to regional competition and safety concerns also impact domestic demand.
Impacts of the Rate Cut
The reduction to 1.50% is the lowest in over two years, signalling the central bank’s commitment to stimulate borrowing and spending. The baht weakened slightly by 0.1% after the announcement, potentially improving export competitiveness but also affecting imports. Thai stocks remained largely unchanged, reflecting mixed investor sentiment amid domestic and international uncertainties. Small businesses, which are vulnerable to these challenges, may benefit from cheaper financing costs.
Long-term Outlook
The central bank foresees continued moderate economic growth but anticipates ongoing headwinds from external trade tensions and structural competitiveness issues. A change in central bank leadership expected in October 2025 may shift focus towards growth support over debt reduction, maintaining a dovish stance on monetary policy. Structural reforms and resolving vulnerabilities in the small business sector will be key to sustainable longer-term growth. The tourism sector may face prolonged competition and safety perception challenges, requiring strategic policy responses beyond rate cuts.
Expert Opinions
Vitai Ratanakorn, the incoming head of the BOT, stated that the key interest rate can go down further. Poon Panichpibool, a markets strategist at Krung Thai Bank, predicts slower growth in export growth, which will reduce overall economic growth in the second half. Erica Tay, director of macro research at Maybank, stated that the economy is "undeniably softening."
According to Erica Tay, the case for an August rate cut has grown stronger due to a reversal in the rising trend of core inflation. The U.S. has placed tariffs on Thai goods at a rate of 19%, less than the initially proposed 36%. Erica Tay also noted that weakening core inflation indicates that recent price weakness is not solely due to global oil prices and weather-related food supply shifts. The tariffs on Thai goods are expected to have a negative impact on the country's growth.
More than 80% of economists predict a 25 basis point reduction in the Bank of Thailand's benchmark one-day repurchase rate, from its current level of 1.75% to 1.50%. Among economists with a longer-term outlook, 19 expect the interest rate to be at 1.25% by the end of 2025, seven expect it to be at 1.50%, and one expects it to be at 1.00%. The remaining economists predict no change in the interest rate.
The slowdown in export growth, which has been in double digits until recently, mainly due to a rush by the U.S. to import goods from Thailand and other trading partners, is expected to negatively impact the overall economic growth in the second half. No further information about the interest rate change or inflation is provided in this paragraph. The economy of Thailand has been slowing, as indicated by a contraction in private consumption and a decrease in exports. Inflation in Thailand has been negative for four consecutive months, including July 2020.
Vitai Ratanakorn will assume the position of BOT's head on October 1, 2025. The Bank of Thailand is expected to lower its key interest rate on August 13, 2025.
- The rate cut by the Bank of Thailand is a move in the finance sector designed to counter the economic outlook of a slowing Thai economy, aiming to stimulate small businesses through cheaper financing costs.
- The economic outlook for Thailand is expected to remain moderately positive, but ongoing challenges from external trade tensions and structural competitiveness issues may require further measures in the business sector for sustainable long-term growth.
