Thai Economy Grapples With Unexpected Deflation

Falling energy prices contribute to continued economic concerns.

Thailand is experiencing its third consecutive month of deflation, sparking worries about consumer demand and economic stagnation. The latest figures reveal a concerning trend that challenges earlier projections for economic growth.

Deeper Dive Into Deflationary Factors

June 2025 saw a 0.3% decrease in inflation compared to the previous year, a figure lower than anticipated, even below the 0.1% drop predicted by Bloomberg. Falling energy costs, particularly fuel (gasoline down 18% year-on-year) and electricity (3.98 baht/unit versus 4.18 baht last year), are primary drivers.

The prices of fresh food, including chicken eggs, vegetables, and fruit, have also declined. Conversely, pork and processed foods have seen price increases. This mixed picture underscores the complexities of the current economic climate.

Consumption and Crude Oil Impact

Analysis indicates a correlation between weak private consumption and low prices, signaling decreased consumer spending. Crude oil prices also strongly influence Thailand’s overall inflation, given energy’s 13% weighting in the national inflation basket.

Given the continued weakness in private consumption projected for the latter half of 2025, coupled with current Brent crude oil price trends, projections remain conservative. The World Bank, for example, recently lowered its 2025 growth forecast for Thailand to 2.8% due to similar concerns about weak external demand and slow tourism recovery (World Bank).

Interest Rate Forecast

The expectation is that Thailand’s inflation rate for 2025 will remain at 0.00% year-on-year. It’s also anticipated that the Bank of Thailand will maintain its policy interest rate (1-day repo) at 1.00% through 2026.

Challenges Ahead

Competition from Chinese products, populist policy measures, global crude oil price trends, and the high economic base of 2024 are expected to restrain Thai inflation throughout 2025.

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