BANGKOK — November 16, 2025 — Thailand’s economy contracted more sharply than expected in the third quarter, signaling mounting challenges for Southeast Asia’s second-largest economy as manufacturing and tourism both weaken.
According to the National Economic and Social Development Council (NESDC), gross domestic product fell 0.6% from the previous quarter, marking the worst performance since 2021. The decline exceeded Bloomberg’s forecast of a 0.3% contraction, reinforcing concerns about slowing momentum in exports, consumption, and visitor arrivals.
Factory Output And Tourism Activity Decline Sharply
The NESDC attributed the downturn to softer factory production, reduced tourist arrivals, and a slowdown in private investment. Analysts say weak external demand and persistent regional supply-chain disruptions have hit Thailand’s manufacturing sector particularly hard.
“Manufacturing activity remains sluggish, and tourism recovery is losing steam,” said Suttinee Yuvejwattana, senior economist at Bangkok Analytics. “The outlook for Q4 remains fragile as global headwinds intensify.”
Tourism, a key growth pillar contributing nearly 20% of GDP, saw arrivals slip below expectations as Chinese visitor numbers plateaued. Meanwhile, hotel occupancy rates and domestic spending both declined from earlier highs.
Broader Economic Headwinds Threaten 2026 Outlook
Government economists warn that the slowdown could extend into early 2026 unless exports rebound or fiscal stimulus accelerates. External factors such as sluggish Chinese demand, rising U.S. interest rates, and regional trade frictions continue to weigh on confidence.
“Thailand’s economy is now facing multiple layers of uncertainty,” said Pathom Sangwongwanich, macro strategist at Krungthai Research. “Without stronger policy support, full-year growth may fall below 1.5%.”
The government has pledged additional measures to support small businesses and boost rural consumption, though implementation delays have limited their immediate effect.
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Inflation And Interest Rate Pressures Add Strain
The Bank of Thailand (BoT), which raised rates earlier this year to stabilize the baht, is expected to maintain a cautious stance amid weakening growth. Inflation remains subdued, but policymakers face pressure to balance price stability and recovery needs.
“Rate cuts are possible in early 2026 if contraction persists,” noted Supatra Vongchai, chief economist at Siam Commercial Bank. “However, the BoT will move gradually to avoid volatility in capital flows.”
The slowdown has also raised concerns over household debt, which stands near 90% of GDP, among the highest levels in Asia. Analysts warn that debt vulnerability could limit the impact of future stimulus measures.
Regional Trends Reflect Broader Asia Slowdown
Thailand’s contraction follows similar patterns across Asia, where economies dependent on exports and tourism have struggled to regain pre-pandemic strength. Both Malaysia and Vietnam reported weaker-than-expected growth, while South Korea and Japan face pressure from declining global demand.
The Asian Development Bank (ADB) projects that Thailand’s full-year expansion will average 1.8%, before improving modestly in 2026 as inflation stabilizes and infrastructure spending rises.
Government Seeks To Reignite Confidence
Prime Minister Srettha Thavisin has urged ministries to accelerate infrastructure and digital-economy investments to attract foreign capital and sustain job creation. The administration also announced plans to review tourism visa policies and expand regional flight routes to boost arrivals.
“Thailand’s long-term fundamentals remain strong,” the NESDC said in a statement. “The government remains committed to structural reforms, export diversification, and investment in technology and logistics.”
Outlook: Growth To Remain Fragile Into 2026
Economists agree that Thailand’s path to recovery will hinge on export demand, tourism revival, and policy execution. Without renewed momentum, growth could remain below regional peers well into next year.
“The message from today’s data is clear,” said Sangwongwanich. “The economy has lost steam, and the next six months will determine whether Thailand can avoid a deeper slowdown.”
