The country faces levies of 36% on shipments to the US if a reduction cannot be negotiated before a moratorium expires in July.

Thailand’s economy grew more than expected in the first quarter of 2025, data showed on Monday (May 19), but the state planning agency slashed its full-year growth and trade forecasts as US tariffs threaten the country’s export engine.

Thailand faces a 36 per cent tariff on shipments to the US, its biggest export market, if a reduction cannot be negotiated before a moratorium expires in July.

The economy grew 3.1 per cent in the January-to-March quarter from a year earlier, the National Economic and Social Development Council (NESDC) said, above market expectations of 2.9 per cent growth and just below the 3.3 per cent pace in the previous quarter, the National Economic and Social Development Council said.

The agency cut its 2025 economic growth forecast to 1.3 to 2.3 per cent from a range of 2.3 to 3.3 per cent seen earlier, saying high consumer and corporate debt burdens and the global trade war are expected to weigh on activity later in the year.

“This is not too pessimistic… and can be adjusted according to the changing situation,” NESDC head Danucha Pichayanan told a news conference.

“The impact of the US tariffs on the Thai economy is expected to last about two years as the economy already has structural problems,” he said.

The NESDC cut its forecast for export growth this year to 1.8 per cent from 3.5 per cent.

The main Thai stock index and the baht dropped slightly after the GDP data.

“Negative quarter-on-quarter GDP may be seen in the second half of the year,” Siam Commercial Bank economist Poonyawat Sreesing said, adding he expected two more interest rate cuts this year as the US tariffs slow economic activity.

On a quarterly basis, South-east Asia’s second-largest economy grew a seasonally adjusted 0.7 per cent in the March quarter, above the poll forecast of 0.6 per cent growth and 0.4 per cent growth in the prior quarter.

The US tariffs were announced in early April, and while full implementation has been delayed there is a 10 per cent interim rate on shipments.

Danucha said growth could slow in the current quarter as the private sector waited for clarity on the tariffs, but noted the government had prepared 200 billion baht for stimulus measures.

Industrial sentiment fell to a six-month low in April due to concerns about the tariffs, the Federation of Thai Industries said on Monday.

The NESDC also lowered its forecast for foreign tourist arrivals to 37 million this year, from 38 million seen earlier, with Chinese tourists, the biggest source market, projected at five million.

Tourist arrivals hit a record of nearly 40 million in 2019, the year before the Covid-19 pandemic.