Thai Economy Shows Signs of Recovery, but the Baht Wavers: Tourism and Exports as Sparks, Domestic Demand Remains Sluggish

The monthly report by the Bank of Thailand (BOT) released at the end of October summarized that "the third quarter slowed down, but signs of improvement were seen towards September." The rebound in manufacturing, recovery in exports, and increase in tourism revenue drove the economy, while private consumption and investment slowed down, presenting a picture of "stagnation and progress" coexisting.bot.or.th

1) Key Points of the Report: Weak Domestic Demand, Recovering External Demand

As of September, the BOT confirmed an upturn in manufacturing, a recovery in exports, and an influx of foreign currency from tourism. Exports in September were up 19.2% year-on-year, and imports were also **up 18%. As a result, there was a trade surplus of $3.6 billion and a current account surplus of $1.9 billion. However, on a quarterly basis, growth remained at a negative rate compared to the previous quarter (-0.5%)**, **and only +1.5% year-on-year**, indicating that the "signs of recovery" are still weak.Reuters

Considering this environment, the BOT decided to maintain the policy interest rate at 1.50%. The tone of the bank is "avoiding a downturn in the economy while recovery is gradual." The decision on policy was also reported by Thailand's public broadcasting accounts, supporting the market's "wait-and-see" mood.X (formerly Twitter)

2) Why Did the Baht Waver?

In October, the Thai baht softened slightly due to the resurgence of the US dollar and fluctuations in the gold market, as reported by Pattaya Mail. The rekindling of US-China trade tensions supported the stronger dollar, which in turn weighed on the baht.Pattaya Mail

However, since the beginning of the year, there have been instances where authorities hinted at market intervention (smoothing) to curb excessive fluctuations in the baht, indicating a lack of a unified direction. The BOT stated that it acted "to avoid rapid fluctuations" and continues to engage in dialogue with the market regarding gold transactions.Reuters

3) Pillars of Demand: Tourism, Electronics, Manufacturing

The recovery drivers indicated by the BOT and local reports are ① the recovery in tourism (rebound in acceptance and customer spending), ② the bottoming out of electronics exports, and ③ the recovery in manufacturing operations. Based on the improvement in September data, a baseline of **"gradual improvement from autumn onwards"** is shared.Pattaya Mail

4) Tailwinds and Headwinds of Policy

In October, the government decided on a co-payment demand stimulus measure totaling 44 billion baht. This scheme, which subsidizes up to 60% of eligible consumption, is expected to have a growth-boosting effect (up to +0.4%pt) within the year.Reuters

On the other hand, the rekindling of US-China tensions poses significant uncertainty for both supply chains and external demand. The BOT's deputy governor presented a cautious outlook, indicating that the growth rate for 2025-26 may fall below the potential growth (about 2.7%), pointing out structural issues and debt problems.Reuters

Furthermore, the World Bank has revised down its growth forecast for Thailand in 2025 to 1.8%. The slow recovery in tourism, weak exports, and sluggish domestic demand are seen as burdens.Reuters

5) The Atmosphere on Social Media: Exchange Rates, Interest Rates, and Households

On X (formerly Twitter) and official media accounts, the following reactions were prominent.

• "Holding Off on Rate Cuts = Wait-and-See" Group
  Regarding the MPC's decision to maintain the 1.50% rate, there was a widespread perception that "even with weak domestic demand, there is limited room for monetary easing" and "prioritizing the balance of prices and exchange rates." Many posts suggested a scenario of "patience" for the time being.X (formerly Twitter)

• "The Tug of War Between Baht Appreciation and Depreciation" Theory
  Considering the trend of the baht's rise since the beginning of the year → the pullback in October, opinions emerged that "it impacts exports and tourism" and "there is a need to extinguish excessive fluctuations." Economic paper accounts pointed out the significant weight of **external factors (dollar, US interest rates, gold prices)**.X (formerly Twitter)

• "Limited Impact on Households" Concerns
  Regarding the co-payment scheme, there were calm comments such as "it is effective for short-term purchasing stimulation, but does not directly address high debt or stagnant income growth."Reuters

※Social media is characterized by immediacy and subjectivity. The above is a "trend" summary cross-referenced with official information (BOT releases and major news agencies).

6) Implications for Industry and Households

• Export Companies: Towards the end of the year, the direction of the baht depends on external drivers. Industries with high exchange rate sensitivity (automotive parts, home appliances, hard disks/semiconductors) should focus on optimizing dollar-denominated orders and inventory turnover. The BOT has clearly stated its stance on curbing excessive fluctuations, and hedging against sharp rises and falls is a priority.Reuters

• Tourism and Services: While the recovery in arrivals continues, the key lies in the recovery of customer spending and length of stay. The "tailwind/headwind" of exchange rates is directly linked to the timing of promotions.bot.or.th

• Households and SMEs: The subsidy measures contribute to a short-term increase in disposable income. However, debt burden and high interest rates suppress consumption. Rather than relying excessively on refinancing, debt adjustment and accurate credit provision are important, as indicated by the authorities' signals.Reuters

7) Risk Checklist

1. US-China Tensions: Additional tariffs and export controls disrupt the supply and logistics of electronic components.Reuters

2. Exchange Rate Volatility: Sudden fluctuations in gold prices and the dollar index influence the short-term direction of the baht.Pattaya Mail

3. Policy Delays: The effectiveness of implementing subsidy measures and boosting household debt.Reuters

8) Conclusion: Can the "Core" of a Thin Recovery Be Strengthened?

The improvement in September was a "sprout" supported by the return of external demand and tourism. However, domestic demand is weighed down by household debt and weak real income, with policy interest rates remaining on hold and exchange rates susceptible to external factors. Going forward, the test will be whether effective household support and recovery of corporate investment sentiment, along with curbing excessive exchange rate fluctuations, can nurture the sprout into a "core."bot.or.th