Global & Thai Economy
Manufacturing and exports in core economies face more pressure in 2H25 amid tariff hikes. Thailand’s tourism sector shows continued weakness
US
U.S. Fed signaled readiness to cut rates as the economy and labor market show rising risks of slowdown. In his speech at Jackson Hole, the Fed Chair indicated that a rate cut could come soon in response to heightened risks to employment, while the inflationary impact of tariff hikes is expected to be only temporary. With changing economic conditions and a shifting balance of risks, the Fed may need to adjust its monetary stance. Although the Fed Chair adopted a more dovish tone, lingering inflation concerns remain a source of uncertainty for future rate cuts.
Several U.S. economic indicators—including employment, jobless claims, consumer confidence, and the personal spending—point to rising risks of slowdown in 2H25. At the same time, while cost-push inflation may edge up due to tariff hikes, demand-pull inflation is likely to ease following a slowdown in the overall economy. Against this backdrop, Krungsri Research expects the Fed to cut rates 2–3 times this year.
Japan
Japan’s services sector supports growth, but manufacturing and exports remain drags on the economy. July exports contracted -2.6% YoY, the weakest in four years, while inbound tourist arrivals rose 4.4% YoY to 3.4 mn. The Ministry of Finance plans to raise the benchmark interest rate used for calculating long-term government bond issuance to a 17-year high of 2.6%, pushing debt servicing costs to a record-high level of around JPY 30 trn.
Services growth remained healthy in 2Q25, supported by growing tourism and a strong labor market. This would lead to further wage increases and support the economy in 2H25. However, manufacturing and exports are likely to contract further amid higher U.S. tariffs. Japan’s exports shrank deeper in July, particularly shipments to the U.S., which contracted for the third consecutive month—posing increasing downside risks to growth ahead. Given these conditions, Krungsri Research expects the BOJ to keep policy rates unchanged through year-end to support a continued recovery.
Thailand
Thailand’s tourism weakens. Krungsri Research sees 2025 foreign arrivals to post first annual decline since pandemic. In July, 2.61 mn foreign tourists visited Thailand, down -15.9% YoY, generating tourism revenue of THB 124 bn, a -14.7% decline. For the first seven months of the year, total foreign arrivals reached 19.3 mn, down -6.4% YoY, with tourism revenue at THB 895 bn, a -4.2% decrease.
Thailand’s tourism sector continues to face key challenges, particularly from a sharp drop in Chinese visitors due to ongoing safety concerns. In the first seven months of the year, Chinese tourist arrivals plunged by -34.9% YoY to 2.62 mn — just 40% of pre-COVID 2019 levels. At the same time, Thailand faces tough competition from regional destinations like Japan and Vietnam, which experienced rising Chinese tourists. As a result, the outlook for Thailand’s tourism remains subdued. Krungsri Research expects 2025 foreign arrivals to decline to 34 mn from 35.5 mn in 2024 — the first annual decline since 2021, following the onset of the COVID-19 pandemic in 2020.
