Thai Economy Flashes Warning Signs as Consumer Spending and Tourism Slow

 

Thailand’s economic recovery showed clear signs of deceleration in August 2025, according to the monthly report released by the Fiscal Policy Office (FPO).

 

The report flagged a concerning slowdown in private consumption, particularly for durable goods, and a significant drop in international tourist arrivals.

 

While exports remain the economy’s primary driver, maintaining growth for the 14th consecutive month, the FPO warned that this expansion is increasingly at risk from external factors, notably potential US customs duties, as well as internal political and border instability.

 

Pornchai Thirraveja, Director-General of the FPO, stated that private consumption indicators were noticeably weakening.

 

New registrations for both motorcycles and passenger cars in August fell by 1.8 per cent and 0.3 per cent respectively year-on-year, further decreasing by 3.0 per cent and 4.8 per cent month-on-month after seasonal adjustment.

 

"Real farmer income significantly decreased by 10.8 per cent year-on-year, compounding the pressure on households," Pornchai noted. "The Consumer Confidence Index also dropped to 50.1 from 51.7 in July, reflecting persistent public uncertainty over the economic outlook, the cost of living burden, and international tensions."

 

Exports Sustain Growth Amid Tariff Threat

Despite the domestic consumption woes, the export sector provided a crucial counterweight.

 

Total export value reached $27.7 billion, marking a 5.8 per cent increase year-on-year. Strong performances were recorded across key high-tech and food categories:

Technology: Computers, equipment, and components saw a 44.1 per cent rise, while electrical circuits grew by 37.0 per cent.

Food: Growth was seen in processed foods (up 26.1 per cent) and fresh/frozen shrimp and chicken.

 

However, the FPO cautioned that the recovery needs continued government support and close monitoring of geopolitical risks.

 

The Director-General specifically highlighted the threat of "retaliatory US customs duties, which may begin to affect certain product categories, slowing export growth."

 

 

Mixed Investment and Tourism Drop

The report painted a mixed picture for private investment. While the volume of capital goods imports increased robustly by 23.6 per cent year-on-year, other indicators contracted.

 

New registrations for commercial vehicles dropped by 10.5 per cent, and domestic cement sales shrank by 8.0 per cent year-on-year.

 

In the services sector, international tourism showed a clear deceleration, with 2.58 million foreign tourists in August, a decrease of 12.8 per cent year-on-year.

 

This contrasts sharply with robust domestic tourism, which saw 22.4 million Thai visitors, up 6.4 per cent year-on-year.

 

Industrial confidence also slightly weakened, pressured by US tariffs, instability in border regions, and recent widespread flooding.

 

 

 

Financial Stability

In contrast to the economic fragility, financial stability remains firm.

 

Headline inflation in August was moderate at 0.79 per cent, and the public debt-to-GDP ratio stood at 64.5 per cent, well within the fiscal discipline framework.

 

International reserves remain high at $267.4 billion.

 

Pornchai revealed that the Thai capital market showed signs of recovery in September, driven primarily by domestic investors.

 

Retail investors posted net purchases of nearly 9.7 billion Baht for the month, demonstrating long-term confidence in the Thai economy despite the prevailing uncertainties.

 

Foreign investors, meanwhile, showed increased confidence in Thai government bonds, returning to net buying in the bond market.