Thai exports in second half of 2025 expected to contract sharply over tariffs, central bank minutes show

The Bank of Thailand (BOT) held its key policy rate at 1.75%, with minutes revealing expectations for sharp export contractions in H2 due to US tariffs and acknowledging monetary policy's limited efficacy. Despite these trade headwinds, the BOT surprisingly raised its 2025 GDP growth forecast to 2.3%, citing a stronger-than-expected start to the year and emphasizing the necessity of targeted measures and business adaptation.

Analysis

The Bank of Thailand's (BOT) latest monetary policy minutes reveal a cautious and somewhat contradictory stance. While the policy committee held the key repurchase rate at 1.75% following two prior cuts, it explicitly flagged expectations for a sharp contraction in exports during the second half of the year, directly attributing the risk to U.S. tariffs. This external headwind is significant enough that the BOT acknowledged monetary policy alone has 'limited efficacy,' signaling that future economic support may need to come from fiscal or structural measures. Despite this pronounced trade risk, the central bank upgraded its 2025 GDP growth forecast to 2.3%, citing a stronger-than-expected start to the year. This creates a clear divergence between a deteriorating external outlook and a more resilient domestic forecast, positioning the upcoming August 13 rate review as a key catalyst for policy direction.

Key Decisions for Investors

• Investors should adopt a cautious stance on Thailand's export-oriented sectors, as the central bank has explicitly forecast a sharp contraction due to U.S. tariffs.
• The BOT's pause on rate cuts, despite acknowledging headwinds, may provide short-term support for the Thai Baht, but traders should monitor the August 13 meeting for any dovish pivot if trade data worsens.
• Given the stated 'limited efficacy' of monetary policy, portfolio managers should place greater emphasis on monitoring Thai government fiscal initiatives and 'targeted measures' as the primary drivers of economic performance and market sentiment going forward.