Weekly Economic Review

Macroeconomic

Weekly Economic Review

28 October 2025

By Macroeconomic Team

U.S.–China trade tensions may ease after this week’s talks. Domestic and external forces exert growing pressure on China

US

U.S. economy continues to face risks from government shutdown and trade tension with China. U.S. headline inflation edged up from 2.9% YoY in August to 3.0% YoY in September — the highest since May 2024 — but below market expectations. Core inflation eased slightly from 3.1% to 3.0%. Meanwhile, consumer confidence fell to a five-month low of 53.6 in October.

The U.S. economic outlook remains clouded by prolonged uncertainty surrounding the government shutdown, as well as intensifying trade tensions after Donald Trump threatened additional tariffs on Chinese imports and new restrictions on software exports — in retaliation against China’s expanded controls on rare-earth exports. Attention now turns to the informal meeting between U.S. and Chinese leaders on October 30, which may determine whether tensions can be meaningfully de-escalated. Given the weakening U.S. economic momentum amid high uncertainty and softer-than-expected inflation, Krungsri Research expects the Fed to proceed with two further rate cuts at the remaining meetings this year, bringing the policy rate to 3.50–3.75%.

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Japan

Proactive fiscal policy expected to support Japan’s economic recovery. Japanese exports rebounded to a 4.2% YoY growth in September from a -0.1% contraction in a prior month. In September, headline inflation rose for the first time in eight month to 2.9% YoY, in line with market expectations. However, the manufacturing PMI slipped further from 48.5 in September to 48.3 in October.

Despite weak private consumption — reflected by the steepest retail sales contraction in four years amid inflationary pressure — there are emerging signs of improvement. Sentiment among large manufacturers picked up, corporates planned to expand investments, and exports returned to growth for the first time in four months, supported by yen depreciation and an improvement in shipments to Asia, which helped offset U.S.-bound exports affected by tariffs. Furthermore, Prime Minister Sanae Takaichi has pledged aggressive measures to revive the economy, address cost-of-living pressures, and boost defense spending — all of which are expected to become fresh drivers of Japan’s recovery toward year-end. On the back of rising optimism, market expectations are increasing for a potential BOJ rate hike later this year.

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China

China’s growth momentum has weakened, with key economic indicators signaling a slowdown, including GDP growth in 3Q25 (+4.8% YoY from 5.2% in 2Q25), retail sales in September (+3% YoY from +3.4% in August), and fixed asset investment in the first nine months (the first contraction since the pandemic, at -0.5%). At the latest meeting of the Central Committee of the Chinese Communist Party, the government pledged to prioritize stimulating domestic demand, improving income distribution, enhancing technological self-reliance, developing green industries and AI, and promoting a Unified National Market. The committee also emphasized addressing issues of excessive price competition (“price involution”) and oversupply.

Consumption and investment have continued to slow, while the property sector remains weak. In addition, exports have played a smaller role in driving growth, with the contribution of net exports to GDP growth falling from 46% in 4Q24 to 25% in 3Q25. Moreover, China faces increasing risks from U.S. transshipment tariffs, export controls on key goods, and higher port fees. Thus, the main hope for the economy depends on the effectiveness of measures to revitalize domestic consumption, both through trade-in subsidies and support for spending in the services sector.

Weekly Economic Review

Authorities aim to accelerate private investment while several factors suggest probability of further monetary easing later this year

BOI plans to expedite over THB 300 bn in investments to support economic recovery ahead. The Board of Investment (BOI) approved measures to accelerate the implementation of large-scale investment projects worth over THB 1 bn each, which were granted investment promotion privileges during 2023–2024 but have faced delays in execution. In total, more than 70 projects with a combined value exceeding THB 300 bn are expected to benefit. In addition, the BOI approved the establishment of the “Thailand Fast Pass” system — a proactive mechanism designed to expedite and facilitate major investment projects, particularly in targeted industries.

The BOI’s investment acceleration mechanism is expected to streamline approval and licensing procedures, reduce processing time, and improve operational efficiency, while addressing policy- and implementation-level bottlenecks. The initiative aims to promote stronger private investment growth and enhance its role as a key driver of Thailand’s economic expansion in the coming period. According to the latest data, investment promotion applications reached a record high of THB 1.05 trn in the first half of 2025, marking a 139% year-on-year increase, led by the digital, electronics, and next-generation automotive industries. Foreign direct investment (FDI) applications for BOI incentives totaled THB 738 bn, up 132% YoY, mainly from Singapore, Hong Kong, and China.

Weekly Economic Review

Krungsri Research expects the policy rate may be lowered to 1.25% by the end of this year. The Bank of Thailand (BOT) recently expected the Thai economy to contract by -0.5% QoQ (or +1.5% YoY) in the third quarter of this year, before rebounding by +0.5% QoQ (or +1.3% YoY) in the final quarter. Overall, GDP growth for 2025 is projected to reach 2.2%, before slowing to 1.6% in 2026, as U.S. import tariffs increasingly weigh on Thailand’s export sector.

Several factors point to the potential for further monetary policy easing: (i) The Thai economy remains fragile and continues to grow below potential, amid heightened uncertainty surrounding U.S.–China trade policies and rising risks of a global economic and trade slowdown; (ii) Inflation remains subdued, standing at -0.72% in September, while the Bank of Thailand (BOT) projects it will return to the 1–3% target range by 2Q26; and (iii) Tight financial conditions, reflected in ongoing credit contraction and elevated real borrowing costs (after accounting for low inflation), which have constrained the recovery of the real economy — particularly among households and SMEs that continue to face high debt burdens and limited access to financing. Krungsri Research therefore assesses that there is a possibility the BOT may lower the policy rate to 1.25% at its final meeting of the year in December, in order to support economic recovery and alleviate financial burdens on the private sector.

Weekly Economic Review

Announced :28 October 2025

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Weekly Economic Review

Macroeconomic