Monthly economic update: February 2025
Executive summary
Global Economy
- In January 2025, global economic data remained resilient, but momentum slowed due to Q4 GDP growth, despite being boosted by front-loaded exports in Asia. The Global PMI slowed, mainly due to weaker service sector growth, while manufacturing saw a slight recovery. Concerns over US tariff policies keep the 2025 outlook uncertain.
- Inflationary pressures in January were more pronounced in developed markets, as inflation significantly diverged from the target, partly due to higher commodity prices.
- Recent economic surprise indices show the U.S. economy is slowing more than expected compared to the global economy, though its fundamental strength still outpaces other countries. Key factors for the Fed's decision, including non-farm payrolls and price indicators, continue to support its pause.
Domestic Economy
- In December 2024, Thai economic activities slowed down due to a temporal improvement from government stimulus in the preceding period despite tourism revenue increased due to a higher proportion of long-haul tourists. Manufacturing production continued to decline, while private investment remained stable. Overall headline inflation in January 2025 moved within the central bank’s lower-bound target.
- Thai economic growth in Q4/24 weaker than market expected. Government consumption expenditure decelerated while private final consumption expenditure remained stable. Meanwhile, gross fixed capital formation and exports of goods and services accelerated. Overall GDP in 2024 grew by 2.5%, accelerated from 2.0% in 2023.
- The impact of the Trump 2.0 administration could be transmitted across various channels. The most significant concern arises from the indirect effects of the US imposing tariffs on Chinese products, which could result in an influx of Chinese goods into ASEAN countries, including Thailand.
Financial Market
- US Treasury yields showed a fading steepening due to lower long-term yields, while Thai bond yields dropped, partly driven by expectations of policy easing after weak economic data and a challenging outlook.
- Since Inauguration Day, most regional currencies have strengthened due to optimism surrounding tariffs, weaker-than-expected U.S. economic data, and the yen's appreciation. Nonetheless, regional currency movements remain vulnerable to the risk of tariff escalation, but there is potential for an appreciation trend if Trump’s policies from 2017 are repeated.
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