Strong baht hits export and tourism income as industrial confidence slips in December
Thailand’s industrial sentiment index fell to 88.2 in December 2025 from 89.1 in November, with the FTI citing Thai-Cambodian border clashes, policy uncertainty after Parliament’s dissolution, fewer working days, PM2.5 impacts and a stronger baht weighing on exporters and tourism.
The Federation of Thai Industries (FTI) reported that its industrial confidence index in December 2025 stood at 88.2, down from 89.1 in November 2025.
Kriengkrai Thiennukul, chairman of the FTI, said the decline was driven by several key factors, including clashes along the Thai-Cambodian border, which disrupted economic activity in border areas across Ubon Ratchathani, Surin, Buri Ram, Si Sa Ket, Sa Kaeo, Chanthaburi and Trat.
He also cited concerns over the continuity of government policy after the dissolution of Parliament—particularly the Khon La Khrueng Plus Phase 2 scheme and Thailand-US trade negotiations.
Industrial production also slowed after earlier front-loaded output, while working days fell during the year-end holiday period. Exports showed signs of slowing in line with weaker conditions in some partner economies, including China, Japan and ASEAN, while PM2.5 pollution in several areas affected outdoor activities and public health.
Kriengkrai added that the stronger baht, driven by US policy rate cuts, capital flows and domestic liquidity, reduced exporters’ income. At the same time, it raised costs for foreign tourists, weighing on the tourism sector overall.
Supportive factors in December
Despite the headwinds, he said several positive factors helped support the economy in December. These included year-end festival spending and accelerated consumption under the Khon La Khrueng Plus scheme ahead of its end date on December 31, 2025, which helped boost consumption and regional spending late in the year.
In addition, the Monetary Policy Committee (MPC) cut the policy rate by 0.25 percentage points, from 1.50% to 1.25% per year, easing financial burdens for businesses and households. The Oil Fuel Fund Administration Committee cut the diesel levy by 20 satang per litre, while some operators reduced diesel and petrol prices by 50 satang per litre, effective December 24, 2025, helping ease living costs and business costs.
Meanwhile, government cost-of-living support measures—such as aid for flood victims, assistance for farmers and support for vulnerable groups—also helped ease expenses and support purchasing power in the short term to some extent.
What businesses are worried about
From a survey of 1,330 entrepreneurs across 47 FTI industry groups in December 2025, concerns that increased were:
- Domestic economy: 62.8%
- Global economy: 57.4%
- Exchange rate (especially from exporters’ perspective): 50.4%
- Energy prices: 28.6%
Concerns that eased were:
- Government policy: 40.3%
- Access to credit: 25.3%
- Loan interest rates: 17.1%
Three-month outlook improves
The three-month forward-looking index rose to 95.7 from 94.9 in November 2025, supported by several positive factors. These included the introduction of import tax collection on goods from online platforms from the first baht, replacing the previous exemption for items priced below 1,500 baht, effective January 1, 2026. The measure is intended to curb imports of cheap foreign goods and reduce unfair competition for Thai businesses.
The expected formation of a new government is also seen as helping speed up economic recovery through clearer policy direction and broader momentum in economic activity.
Risks to watch
However, Kriengkrai said there are downside risks that require close monitoring. These include concerns that the Thai–Cambodian border situation could become tense again, despite a ceasefire being signed, and the European Union’s Carbon Border Adjustment Mechanism (CBAM), which takes effect from January 1, 2026. CBAM will increase compliance costs, including greenhouse gas emissions reporting, ahead of formal carbon charges beginning in 2027.
Kriengkrai said the FTI’s recommendations to the government include:
- Exchange rate management: The government and relevant agencies should help manage the exchange rate to ease baht appreciation by monitoring and strengthening oversight of foreign-exchange market transactions, capital flows, the gold market and digital-asset trading, to reduce speculation and currency volatility, while preventing transactions inconsistent with real economic activity.
- CBAM compliance support: The government should promote compliance with the EU’s CBAM, now fully in force from January 1, 2026, such as providing funding and technical experts to advise on carbon reduction and greenhouse gas reporting, promoting mechanisms to circulate used raw materials domestically, and encouraging the use of clean energy.
- Public procurement for SMEs: The government should increase the share of procurement awarded to SMEs through the e-GP system to 50%, and set this as a performance indicator (KPI) for state agencies, to expand market opportunities and improve SMEs’ access to public procurement.
