Anusorn Thammajai: Thailand Economy at Risk of Technical Recession

Thailand’s Economy at a Crossroads: Technical Recession Risk and What Comes Next

Anusorn Thammajai — Dean of the Faculty of Economics and Director of the Centre for Economic, Digital Investment, and International Trade Research at the University of the Thai Chamber of Commerce — has put a cautious flag on Thailand’s economic map. His latest reading suggests the economy may expand by less than 1% in Q4, and there’s a non-trivial risk that GDP could fall quarter-on-quarter. If Q4 records another contraction after Q3’s 0.6% drop from the previous quarter, Thailand would technically be in a recession.

Numbers that matter

Here’s the snapshot: third-quarter GDP climbed 1.2% year-on-year but shrank 0.6% quarter-on-quarter. The discrepancy between yearly and quarterly views is important — annual growth masks the recent slowdown. Two consecutive quarters of negative QoQ growth equals a technical recession. Whether that evolves into a full-blown recession depends on whether the slide becomes prolonged and broad-based across income, spending, jobs, production and inflation.

Why recovery isn’t automatic

Even if the economy slips next year, recovery is possible — but not guaranteed. Anusorn highlights three friction points that could slow a rebound:

• Policy interest rates that don’t fall fast enough — he points to a 1% rate as a helpful cushion for revival;
• Government spending that remains in the slow lane — public spending contracted in Q3, with public investment down 5.3% and government consumption spending down 3.9%;
• Short-lived stimulus measures — programs such as “Khon La Khrueng Plus” (67 billion baht) may only boost year-end consumption rather than sustaining demand into the new year.

Deflation looms

Inflation is flirting with the negative zone. General inflation has been negative for several months, and this year’s average is expected around -0.2% to -0.3%. Next year could look similarly flat or slightly negative if private investment and consumption don’t push past 3% growth. That kind of price weakness can sap business margins, delay investment decisions, and deepen an economic malaise if not addressed carefully.

The twist in trade and investment

Thailand’s export and investment growth now carry a higher share of imported inputs than in the past. In plain language: more of what’s counted as “Thai” production is actually driven by foreign-made parts. That reduces domestic value-added growth and leaves output vulnerable to external tariffs — especially when re-exported goods face high trade duties abroad.

Sector-by-sector: winners and wait-and-sees

Not all sectors are painted with the same brush. Anusorn sees a mixed industrial outlook next year, shaped by trade tensions, tech changes (hello, AI), and local demand conditions:

• Automotive: The industry has apparently bottomed out and should recover gradually. Electric and hybrid vehicles are forecast to overtake half the market — a structural shift to watch.
• Electronics: Fierce competition plus U.S. tariffs could squeeze margins and market share.
• Retail and food service: Expect a slowdown in retail, with only modest growth for restaurants and cafés as consumer purchasing power stays weak.
• Construction and public works: Construction looks steady. If the government accelerates about 860 billion baht in public projects, the sector could get a meaningful lift.
• Real estate: Growth will be slow. Tighter scrutiny on money-laundering could curb artificial demand, leaving oversupply in some segments and the risk of localized price corrections.

Fiscal levers and public debt

Raising VAT right now would be counterproductive — purchasing power is fragile and an increase could choke off a fragile recovery. Instead, Anusorn urges better budget efficiency and anti-corruption measures that could save 200–300 billion baht annually — a tidy sum that would strengthen fiscal position without burdening households. Still, long-term reforms to diversify revenue sources are essential to avoid public debt creeping beyond the critical 70% of GDP threshold.

What to watch next

If you’re tracking the Thai economy, keep an eye on these indicators:

• Quarter-on-quarter GDP for Q4 — a second negative quarter equals a technical recession;
• Policy interest rate moves — a quicker reduction to around 1% would help liquidity and borrowing costs;
• Government disbursement speed, especially public investment projects;
• Private investment and consumption trends — can they sustainably exceed 3%?
• Inflation trajectory — when and if it moves back into positive territory.

In short: Thailand’s economy is navigating a narrow strait between manageable slowdown and deeper downturn. The sails of recovery will depend on smart fiscal nudges, timely monetary support, and confidence returning to households and businesses. Without those, the storm clouds of deflation, subdued domestic output and rising public debt could make the journey much rockier.

Picture credit: FreePik