Monthly economic update: August 2025
Executive summary
Global Economy
- In August 2025, the global economy grew more than expected; nonetheless, a payback period is likely in the H2. Meanwhile, global inflation remains generally subdued. Tariff negotiations offered some clarity on rates, though the overall impact remains uncertain.
- Despite the robustness in US economy, recent US labor data has raised concerns about the economy’s momentum heading into the H2. Meanwhile, China’s economy is showing signs of slowdown in H2, with further policy support likely in Q4.
- For monetary policy, The Fed is likely to resume its easing cycle after weak July labor data and Powell’s speech in Jackson Hole, while Asian central banks lean toward steeper cuts as tariff impacts are about to emerge.
Domestic Economy
- In June 2025, Thai economic indicators continued to
soften from the previous month. The tourist arrivals were relatively
stable regarding to border conflicts and
low-season effect. Manufacturing production indicator also soften aligning with merchandise exports. Meanwhile, private investment increased, as mainly from machinery and equipment. On the other hand, headline inflation in July 2025 remained negative for fourth consecutive month, while core inflation decelerated. - In Q2/25, GDP growth decelerated from the previous quarter but above market expectation. Gross fixed capital formation, and imports of goods and services accelerated, merchandise exports also remained solid, meanwhile, private consumption showed signs of slowdown. Additionally, the NESDC revised up its GDP forecast for The Thai economy in 2025, which is expected to expand 2% (within the range of 1.8-2.3%).
- The Monetary Policy Committee (MPC) voted unanimously to cut the policy rate to 1.50%, due to the weakening economic growth and persistently low inflation going forward. Specifically, GDP growth in the second half of the year is expected to decelerate. This reduction is to address growing economic vulnerabilities and provide financial relief to specific groups, particularly SMEs and low-income households.
Financial Market
- US bond yields declined in a bull steepening move, led by a sharp drop in short-term rates, as markets increasingly priced in a potential Fed rate cut in September. Similarly, Thai bond yields declined further across the curve after the MPC cut the policy rate by 25bps to 1.50%.
- The dollar softened on the month, slipping back below the 100 handle, as softer labor market data and a dovish tone from Powell at Jackson Hole weighed on sentiment. Meanwhile, the Thai baht broadly strengthened in line with major and regional peers. In the first half of August, the baht traded within a narrow range, as evidenced by a decline in realized volatility.
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