Kiatnakin Phatra Securities (KKPS) wrote that the Bank of Thailand’s Monetary Policy Committee (MPC) voted unanimously to cut the policy rate by 25 basis points to 1.25%, in line with expectations, amid mounting negative shocks to the economy, including flooding in southern provinces, the border conflict with Cambodia, and the dissolution of parliament, which is expected to delay government stimulus measures.
The MPC’s tone was notably more dovish, highlighting a clearly slowing economy and rising risks. However, the committee reiterated the importance of maintaining macro-financial stability and acknowledged the limited policy space that remains.
According to the committee, Thailand’s economy is projected to grow by 2.2% in 2025, 1.5% in 2026, and 2.3% in 2027, with a slowdown in 2026 mainly due to weaker private consumption and goods exports—partly affected by U.S. tariffs—while tourism is expected to recover gradually.
Risks cited by the MPC include ongoing U.S. trade policies and sectoral adjustments, particularly for SMEs facing strong competition and restricted access to credit. The committee noted that some of the slowdown is structural and emphasized the necessity for coordinated policy action across various sectors.
Headline inflation forecasts were revised lower to -0.1% for 2025, 0.3% for 2026, and 1.0% for 2027, mainly reflecting subdued global energy prices, government cost-of-living subsidies, and weak demand-side pressure. The MPC stated that deflation risks remain limited since there is no broad-based price decline across goods and services.
Despite lower policy rates helping ease debt servicing burdens, overall credit growth remains contracted as financial institutions maintain caution toward lending, especially to SMEs and low-income households.
The MPC supports targeted financial measures to assist these vulnerable groups. It also acknowledged the rapid appreciation of the Thai baht and highlighted the need to closely monitor exchange rate movements and consider measures to manage foreign exchange activities.
Given the softer tone and ongoing economic concerns, KKPS anticipates there could be an additional policy rate cut. The MPC did not indicate explicitly if this was a one-off move, instead reiterating the need to preserve policy space. The brokerage firm maintains its view that the terminal policy rate could reach 1.0% in the first half of 2026, depending on further economic data.
