Monthly economic update: June 2025
Executive summary
Global Economy
- From May to mid-June 2025, economic data continued to signal a global slowdown including US and Chinese economic data. Meanwhile, overall inflation pressures appear more controlled despite some remaining upside risks.
- Rising tensions in the Middle East have pushed oil prices higher due to fears of supply disruptions, particularly if the Strait of Hormuz, a key route for about 20% of global crude oil and LNG consumption, is closed. The tensions have eased after a ceasefire announced by US President Trump. However, Iran’s nuclear program is only delayed, not dismantled, so the risk may return.
- For the policy rate, the central bank easing cycle continues, but some await clarity after tariff deadlines and developing geopolitical risks. The FOMC held rates at 4.25–4.50% as expected, with the 2025 median dot still implying two cuts. Meanwhile recent Asian central bank decisions have diverged, reflecting different priorities.
Domestic Economy
- In April 2025, Thai economy improved from the previous month, driven by the manufacturing sector and related services. Private investment increased, mainly in machinery and equipment. The tourism sector slightly improved but remained contracted compared to the same period last year. Merchandise exports and private consumption, however, declined from the previous month.
- Headline inflation in May 2025 remained negative marking a second-consecutive month due to the falling prices of fresh food and energy items. Notably, trade balance (Custom basis) registered a deficit following a great expansion in imports leading to current account balance also decrease.
- MPC held the policy rate at 1.75% in the third meeting of 2025. MPC committee also projected Thailand’s economy to grow modestly in 2025 and 2026 due to the better performance in the first half of 2025, however, growth is expected to slow in the latter half of the year due to the negative impact of tariffs on exports and a decline in private consumption.
Financial Market
- Over the past month, US bond yields have declined across the curve, influenced by growing expectations of a Fed rate cut. Meanwhile, geopolitical tensions in the Middle East have increased demand for safe-haven assets, particularly long-term bonds, helping to compress term premiums. Thai bond yields have declined across the curve despite net bond outflows from foreign investors.
- The de-dollarization trend remained the primary driver in the FX market, despite a brief dollar uptick due to Middle East tensions. Meanwhile, the Thai Baht moved in line with the dollar’s fluctuations.
--------------------------------
