The Bank of Thailand’s (BoT) decision on December 17, 2025, to lower the benchmark interest rate to 1.25% marks a definitive shift from inflation-watching to active economic defense. While the 25-basis-point cut was widely anticipated, the road ahead for the Thai economy in 2026 suggests a complex balancing act between supporting domestic growth and navigating global trade volatility.
The most immediate impact will be felt in the financial and property sectors. By lowering borrowing costs, the BoT aims to provide a lifeline to small and medium enterprises (SMEs) and high-debt households who have been suffocating under tight credit conditions. For the SET Index, this move acts as a “valuation floor,” likely sparking a rotation into high-dividend stocks and rate-sensitive industries like utilities and consumer finance.
Furthermore, the cut is a direct response to the Thai Baht’s recent strength. A weaker policy rate narrows the interest-rate differential with the U.S. Federal Reserve, potentially cooling the Baht’s appreciation. This is critical for exporters who have struggled with uncompetitive pricing and for a tourism sector that remains the country’s primary engine of foreign exchange.
Most market analysts, including those from SCB EIC and Maybank, believe this is not a one-off event. With Thailand’s headline inflation trending near zero and GDP growth for 2026 projected at a modest 1.5% to 1.7%, the consensus points toward a “Terminal Rate” of 1.00% by the first half of 2026.
However, monetary policy alone cannot solve Thailand’s structural issues. The kingdom faces significant headwinds from U.S. trade policies and potential transshipment tariffs that threaten the manufacturing core. While lower rates help, the economy’s ultimate recovery will depend on how the government manages the current political transition and whether it can effectively deploy fiscal stimulus alongside the BoT’s accommodative stance.
In summary, the December cut is the first step in a broader easing cycle intended to “shore up the floor” of the economy. Investors and citizens should prepare for a year of low rates, a softer Baht, and a continued focus on debt restructuring as Thailand navigates a fragile global landscape.
Kasikorn Securities wrote in its latest comment after the cut announcement that there is a chance the MPC will further cut the policy interest rate by another 25bps next year, bringing it down to 1.00% by the end of 2026. The firm believes this rate cut will help boost short-term investment sentiment. For the overall market outlook, Kasikorn estimates SET Index will fluctuate within the 1,250 – 1,280 range until the end of 2025. Although the market faces negative factors, inflows into tax-deductible mutual funds continue to provide support.
The finance, real estate, and energy sectors—especially companies with high debt—are expected to benefit from reduced financial costs (lower cost of fund). Meanwhile, banks and ICT sectors should also see positive effects as funds may rotate into high-dividend stocks amid a low interest rate environment (search for yield). Recommended stocks include SAWAD, TIDLOR, AP, KKP, KTB, SCB, GPSC, and BGRIM.
For the baht, it may continue to appreciate, even as Thailand lowers policy rates. Kasikorn sees support levels at 31.4 and 31.1 baht, following the weakening US dollar due to persistently weak US employment data, which could prompt the Fed to cut its Fed fund rate more than once, exceeding current dot plot projections for next year. The baht’s key turning point could await the MPC’s final rate reduction in this cycle, as speculative flows in currency and short-term bonds might decline.
