(Bangkok, 4th) The Governor of the Bank of Thailand, Settaput, said that US tariffs and the resulting influx of transhipped goods into Thailand could harm multiple industries in the second largest economy in Southeast Asia, and even leave deep scars.
In an interview with Nikkei Asia, Settaput stated that if Thailand's export-oriented industries cannot enter the US market to sell processed foods, electronics, and auto parts, these industries could be adversely affected.
Even worse, the domestic Thai market may also be impacted by products redirecting to Thailand because they cannot enter the US market, such as furniture, textiles, clothing, plastics, petrochemicals, and steel.
Settaput said, "Imports from many countries will surge, especially from China."
"This is particularly worrying for Thailand because many industries or sub-industries affected by the surge in imports comprise a large number of small and medium enterprises. They are more vulnerable and account for a significant share of the labor market."
According to the Chinese customs department statistics, since the Trump administration announced reciprocal tariffs on April 2, Chinese exports to the US in April fell by 21%. Meanwhile, China’s exports to the global market increased by 8%, with a 28% surge in exports to Thailand.
Settaput said the wide-ranging impact of tariffs makes it difficult for the central bank to make predictions, hence they have unprecedentedly offered two economic forecasts.
The Bank of Thailand downgraded this year’s economic growth forecast on April 30, predicting growth at 2.0% in one scenario and 1.3% in another.
This aligns with the forecast of the National Economic and Social Development Board, which predicts that Thailand's economy will grow between 1.3% to 2.3% this year, with a median of 1.8%.
“We will start to see the impact of the tariffs in the third and fourth quarters. This largely depends on the outcome of trade negotiations, and our long-term potential growth rate prediction is about 2%.”
Despite Thailand experiencing economic headwinds, Settaput is not overly pessimistic. He said the current situation is not as severe as during the COVID-19 pandemic in 2020 and noted that Thailand's service industry will play a crucial role in supporting the economy.
To support the economy, the Thai central bank has cut the policy rate twice this year, with the current rate at 1.75%. Settaput said the central bank's decision considered not only inflation. “We believe this takes into account to some extent the impact that weak growth prospects may have.”
Thailand is deeply entrenched in the quagmire of high household debt, and the central bank has been taking measures to reduce household debt, bringing the debt-to-GDP ratio down to 88.4% by the end of last year. Settaput said, “In terms of direction, things are moving the right way, but 88% is still too high.”
However, Settaput believes that, on the positive side, tariffs might offer ASEAN an opportunity to establish closer economic ties within the region. “I hope this region can further integrate, especially intra-ASEAN and with its partners.”
In an interview with Nikkei Asia, Settaput stated that if Thailand's export-oriented industries cannot enter the US market to sell processed foods, electronics, and auto parts, these industries could be adversely affected.
Even worse, the domestic Thai market may also be impacted by products redirecting to Thailand because they cannot enter the US market, such as furniture, textiles, clothing, plastics, petrochemicals, and steel.
Settaput said, "Imports from many countries will surge, especially from China."
"This is particularly worrying for Thailand because many industries or sub-industries affected by the surge in imports comprise a large number of small and medium enterprises. They are more vulnerable and account for a significant share of the labor market."
According to the Chinese customs department statistics, since the Trump administration announced reciprocal tariffs on April 2, Chinese exports to the US in April fell by 21%. Meanwhile, China’s exports to the global market increased by 8%, with a 28% surge in exports to Thailand.
Settaput said the wide-ranging impact of tariffs makes it difficult for the central bank to make predictions, hence they have unprecedentedly offered two economic forecasts.
The Bank of Thailand downgraded this year’s economic growth forecast on April 30, predicting growth at 2.0% in one scenario and 1.3% in another.
This aligns with the forecast of the National Economic and Social Development Board, which predicts that Thailand's economy will grow between 1.3% to 2.3% this year, with a median of 1.8%.
“We will start to see the impact of the tariffs in the third and fourth quarters. This largely depends on the outcome of trade negotiations, and our long-term potential growth rate prediction is about 2%.”
Despite Thailand experiencing economic headwinds, Settaput is not overly pessimistic. He said the current situation is not as severe as during the COVID-19 pandemic in 2020 and noted that Thailand's service industry will play a crucial role in supporting the economy.
To support the economy, the Thai central bank has cut the policy rate twice this year, with the current rate at 1.75%. Settaput said the central bank's decision considered not only inflation. “We believe this takes into account to some extent the impact that weak growth prospects may have.”
Thailand is deeply entrenched in the quagmire of high household debt, and the central bank has been taking measures to reduce household debt, bringing the debt-to-GDP ratio down to 88.4% by the end of last year. Settaput said, “In terms of direction, things are moving the right way, but 88% is still too high.”
However, Settaput believes that, on the positive side, tariffs might offer ASEAN an opportunity to establish closer economic ties within the region. “I hope this region can further integrate, especially intra-ASEAN and with its partners.”