Monthly economic update: May 2025
Executive summary
Global Economy
- From April to mid-May 2025, economic data continued to indicate a global economic slowdown, although the temporary pause in tariffs has helped reduce the risk of a recession. At the same time, inflation appears to be softening both DM and EM, with diminished global upward pressure on prices.
- The easing of tariff tensions has greatly reduced the chances of a US recession this year. Still, the economy recorded its first contraction since 2022, mainly due to a spike in imports from front-loading. Nonetheless, recent labor and inflation data support the Fed holding policy rate
- Despite a positive outlook for the Chinese economy, reaching 5% growth in 2025 remains a challenge. April data shows slowing retail sales, industrial output, and fixed-asset investment. The property market is still struggling, with declining housing prices and property investment, and other indicators like CPI and PPI suggest domestic demand remains sluggish.
Domestic Economy
- In March 2025, Thai economic activities continued to slow from previous month due to lower in the tourism-related activities, aligning with lower number of foreign tourists. Private consumption and investment also declined. Meanwhile, merchandise exports remained high due to accelerated exports to avoid hitting by US tariff.
- Headline inflation in Apr25 turned negative in 13 months marking a deflation concerns. Notably, trade balance (Custom basis) registered a surplus following a great expansion in exports leading to current account balance also increased remarkably.
- In Q1/25, Thai economy grew surprisingly resulting from acceleration in exports of goods and services. While, private final consumption expenditure, general government final consumption expenditure, imports of goods and services, and gross fixed capital formation. In addition, NESDC revised down the GDP growth projection in 2025 amid trade uncertainty going forward.
Financial Market
- US bond yields rose across the curve due partly to shifting expectations around Fed rate cuts and concerns over Trump’s tax bill. Meanwhile, Thai bonds slightly mirrored the move, showing a bear flattening trend.
- The dollar resumed its decline due partly to fiscal concerns, after a brief rebound from the US-China tariff pause and lowered Fed rate cut expectations. Meanwhile, regional currencies strengthened, with the Thai baht continuing to correlate with gold prices. Given the fading US exceptionalism, the dollar is likely to weaken, while elevated gold prices amid this backdrop may further boost the Thai baht despite weak fundamentals.
--------------------------------
