World Bank warns Thailand and China facing deflationary pressures

Thailand’s economy continues to face multiple headwinds, leaving its growth lagging behind several neighbouring countries. One of the key challenges is the country’s persistently low inflation rate.

In September 2025, Thailand’s headline consumer price index (CPI) stood at 100.11, down 0.72% year-on-year, marking the sixth consecutive month of decline since April.

On October 7, Aaditya Mattoo, Chief Economist for East Asia and the Pacific at the World Bank, addressed the issue during a press briefing on the East Asia and Pacific Economic Update (October 2025) report.

“To varying degrees, inflation in most East Asia and Pacific economies remains within target… with China and Thailand facing deflationary pressures,” Mattoo said.

He explained that China’s deflation problem has led Beijing to export more goods at lower prices to regional markets. The influx of cheaper Chinese imports, while helping to suppress inflation in importing countries, has also raised concerns among local industries struggling to compete with the low-priced Chinese products.

Mattoo added that interest rates in many economies across the region are currently higher than those in advanced economies, resulting in large capital inflows that have influenced exchange rates. This situation, he noted, gives several countries, including Thailand and Indonesia, room to ease monetary policy to stimulate domestic economic activity.

However, Nantapong Chiralerspong, Director-General of the Trade Policy and Strategy Office (TPSO) under the Ministry of Commerce, clarified that Thailand’s six consecutive months of negative inflation do not yet constitute deflation, but rather reflect a period of economic slowdown amid low inflation.

He explained that true deflation requires several key factors. Although headline inflation has turned negative, core inflation remains positive, indicating that domestic consumption is still ongoing. Thailand’s employment rate has not changed significantly, and while GDP growth is modest, it continues to expand. He acknowledged, however, that this situation is relatively uncommon for the Thai economy.

Nantapong expressed confidence that government spending and stimulus measures, such as the Let’s Go Halves co-payment scheme and tourism promotion campaigns, will help boost consumer confidence and spending. 

Still, these policies are unlikely to push inflation up sharply, unlike the rise in fresh food and energy prices, which together account for around 29% of the inflation basket.

As of August 2025, Thailand’s headline inflation rate was –0.79%, ranking ninth lowest among 140 economies worldwide and the lowest in ASEAN among the nine member countries that reported inflation data: Brunei, Singapore, Malaysia, the Philippines, Cambodia, Indonesia, Vietnam, and Laos.

Sathit Sutipanya