Monthly economic update: January 2025
Executive summary
Global Economy
- In December 2024, U.S. exceptionalism stands out, as shown by recent data and the surprise index. Meanwhile, advanced economies, especially the Euro Area, appear more vulnerable. With risks from U.S. tariffs and uncertainty over Trump's policies, inflationary pressures are increasing in developed markets, while emerging markets remain stable around 2%.
- U.S. economic data in December was robust, bolstered by strong performance in the service sector. Non-farm payrolls exceeded expectations, indicating a strong labor market. At the same time, recent CPI data points to a continuation of the disinflation trend.
- China's economy exceeded expectations last year, driven by a late policy push and a surge in exports. GDP grew 5.4% in Q4, bringing full-year growth to 5%, in line with the government's target. Fiscal policy will be the primary focus of China's stimulus efforts in 2025.
Domestic Economy
- In November 2024, Thai economic activities slowed down due to a temporal improvement of private consumption in the preceding period, in tandem with decreased activities in the trade sector. Moreover, manufacturing production decreased following lower production of food-related and automotive sectors. Private investment also declined in both machinery and equipment, as well as construction categories.
- Despite accelerated inflation in December regarding to rising both energy and food prices, Thailand’s average inflation for 12 months of 2024 still below the central banks’ target range and below the peers.
- According to new era of US trade war (Trump 2.0) studied from experience in 2017 (Trump 1.0), Thailand would to be the second most affected country among major ASEAN exporters, which mainly due to high level of trade surplus with the US and high level of trade barriers on US agricultural products. Given that the US may pressure Thailand to import more in specific products particularly in agricultural products as a bargaining tool for raising import tariff.
Financial Market
- U.S. Treasuries experienced volatility due to U.S. economic data and Trump’s policies, while Thai bond yields exhibited a slightly stronger correlation with the modest increase in yields.
- The Thai baht is primarily driven by external factors, such as U.S. policy expectations and risks associated with Trump's policies, mirroring trends in other regional currencies, particularly those in ASEAN.
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