In December 2025, the Bank of Thailand’s Monetary Policy Committee (MPC) unanimously voted to cut the policy rate by 0.25 percentage point to 1.25 percent. This decisive action addresses an economic landscape where growth is projected to moderate from 2.2 percent in 2025 to just 1.5 percent in 2026, according to the minutes from its latest policy meeting published on Monday.
The Committee identified several cyclical and structural headwinds, including the impact of U.S. tariff measures on exports and a slowdown in private consumption as households become more cautious. Internal pressures such as persistent household debt and a slow recovery in labour income further constrain domestic demand. Additionally, recent flooding in the southern region is expected to reduce GDP by 0.1–0.2 percent, with small businesses in trade and tourism facing a recovery period exceeding three months.
A significant challenge highlighted by the sources is the 8 percent appreciation of the Thai baht, which has disproportionately affected SMEs and exporters with low profit margins. To mitigate volatility, the Bank of Thailand has increased scrutiny of forward foreign exchange transactions linked to gold trading.
Inflation is projected to remain subdued, estimated at -0.1 percent for 2025 and 0.3 percent for 2026, largely due to lower global energy prices and limited demand-side pressures before gradually returning to the target range in the first half of 2027. While deflationary risks are currently assessed as low, the MPC is monitoring these developments closely. Furthermore, there is a worrying structural shift toward the services sector, which often generates lower value-added and more uncertain income compared to manufacturing.
To support the recovery, the MPC emphasised the need for coordinated policies, including the upcoming “SMEs Credit Boost” and “Pid Nee Wai, Pai Tor Dai” programmes. This accommodative stance aims to alleviate debt burdens and ensure financial conditions facilitate growth across all sectors.
