UBS Economics-APAC Economic Perspectives _Thailand Soft growth, more cuts...-118898749

ab17 November 2025Global ResearchAPAC Economic PerspectivesThailand: Soft growth, more cuts comingQ3 growth slows to 1.2% y/y, weakest in four yearsThailand’s economy grew just 1.2% in Q3, down from 2.8% in Q2, marking the slowest pace since Q3'21 and missing both consensus and UBS forecasts of 1.6%. On a sequential basis, GDP contracted by -0.6% q/q sa, marking the sharpest decline since Q4'22. The slowdown was mainly due to weaker government spending and public investment, even though exports held up and net exports added positively to growth. We highlight that from a national accounts (GDP by expenditure) perspective, there was a larger than usual statistical discrepancy drag. This tends to align with periods of inventory destocking, when manufacturing production and exports diverge. Our read is that payback of front-loading came through in Q3 via destocking rather than a drop in exports. The rising disparity between manufacturing production and goods exports may also reflect an increasingly small domestic value added contribution from the latter.Manufacturing slows, but exports hold upManufacturing contracted by -1.6% y/y after clocking a 1.7% y/y expansion in Q2, while agriculture slowed to 1.9% y/y from 6.4%, and services growth eased to 2.3% y/y from 3.4%. Sequentially, manufacturing and agriculture output fell by 2.5% q/q sa and 3.1% q/q sa respectively, while services output was up 0.4% q/q sa. The drop in manufacturing was led by light industries such as food, textiles, and furniture, as well as raw materials like refined petroleum, rubber, and plastics. In contrast, production of computers and electronic components continued to expand, although the gap between production and exports seems unusually wide. Overall growth in goods exports eased to 10.8% y/y (vs. 14.3% y/y in Q2) but remained solid, driven by electronics exports. Combined with slower growth in imports, net exports contributed 2.1ppt to overall y/y growth, vs 0.8ppt in the previous quarter. There was also continued inventory destocking, which, according to NESDC, were driven by agriculture (paddy/cassava), manufacturing goods (particularly plastics, synthetic rubber, and domestic appliances, consistent with the types of goods that Thailand exports to the US) and gold (due to higher export prices). Government spending pulled back in Q3 but will accelerate in Q4Government consumption fell 3.9% y/y, reversing a 2.2% increase in Q2. Budget disbursement dropped 11.6% y/y in Q4 FY25 (the Jul-Sep quarter), with capital spending plunging 43.6% y/y. Investment also slowed. GFCF rose just 1.1% y/y versus 5.8% in Q2, as public investment contracted 5.3% y/y after a strong rebound previously. Private investment held steady at 4.2% y/y. We anticipate a quarterly sequential rebound in Q4 as fiscal spending accelerates. Part of this would reflect the launch of the Bt44bn “Kon La Khrueng Plus” consumption co-payment scheme, which would also support private consumption. The go