Kiatnakin Phatra Securities (KKPS) has flagged significant economic risks for Thailand in the fourth quarter of 2025 due to catastrophic flooding in at least 10 southern provinces, including Songkhla’s Hat Yai, a vital commercial and tourism center.
The floods have brought daily trade and tourism losses estimated between THB 1-1.5 billion, primarily from halted border trade with Malaysia and the mass cancellation of high-season tourism bookings. The disaster has severely affected key sectors in the region, namely rubber, palm oil, and tourism.
KKPS estimates the total economic damage at THB 10-25 billion, which equates to about 0.05%-0.15% of Thailand’s annual GDP. Although reconstruction efforts are expected to inject THB 15-20 billion into the economy via public and private spending, this positive impact will likely be delayed until the first to third quarters of 2026 and won’t fully offset the immediate blow to 4Q25 GDP.
The floods come at a critical juncture, striking during a period typically crucial for consumption and services. With the economy already contracting quarter-on-quarter in 3Q25 (-0.6%), the added downside from the floods increases the risk of a negative QoQ GDP print in the current quarter, potentially placing Thailand into a technical recession.
Given weak domestic demand, low inflation, ongoing negative bank loan growth, and the rise in non-performing loans, KKPS believes the Monetary Policy Committee (MPC) may be compelled to cut rates in December, despite a traditionally cautious approach. The analyst expects the policy rate to ultimately reach a terminal level of 1% for this cycle.
While the Bank of Thailand (BOT) has implemented targeted relief measures—including urging banks to provide debt moratoriums, reduced payments, and emergency low-interest loans for flood-affected borrowers—KKPS argues these actions, while necessary, are not a substitute for a broader, national-level policy response. Stronger stimulus is seen as essential to prevent a deeper economic downturn.
