Monthly economic update: March 2025
Executive summary
Global Economy
- In February 2025, ongoing uncertainty is weighing on the global PMI. The pace of expansion in the service sector slowed. Meanwhile, the manufacturing PMI rose to an 8-month high, likely due to the front-loading effect ahead of US tariff impacts. Inflationary pressures eased modestly in February; however, soft data survey indicate input costs have begun to rise again especially in DMs.
- The US economy is exhibiting more signs of slowdown, especially in soft data; However, fundamental economic data remains robust, particularly in consumption, as seen in retail sales from the control group exceeding expectations. Industrial production also outperformed expectations.
- In China, Economic data from the first two months showed some recovery, with consumption, investment, and industrial production exceeding expectations. However, new-home prices fell faster in February, despite government efforts, and exports were weaker than expected, reflecting the early impact of US tariffs.
Domestic Economy
- In January 2025, Thai economic activities improved from previous month from both internal and external factors, supported by increasing activities in the tourism sectors, and partly benefited from the government stimulus measure. Manufacturing production and private investment increased in several categories.
- On the economic stability front, headline inflation in February 2025 remained moved within the official target. Notably, trade balance (Custom basis) marked a deficit while the current account balance slightly dropped from previous month due to smaller gain in trade balance (BOP basis).
- The MPC voted non-unanimously to cut the policy rate 0.25 percentage point to 2% in the 1/2025 meeting. It was pointed that the Thai economy showed rising downward pressure from structure challenges, particularly manufacturing sector. Moreover, inflation rate remained low driven by supply factors and expected to stabilize around the lower bound of the target range.
Financial Market
- US Treasury yields dropped across the curve, driven by concerns over a potential US economic slowdown and expectations of Fed rate cut, while Thai bond yields fell further on expectations of policy easing amid weak economic outlook.
- The dollar reversed its gains due to concerns about an economic slowdown and the rise of the Euro and Yen. At the same time, the Thai baht gained strength along with the region, boosted by dynamics in gold price movement. Looking ahead, the dollar's downtrend could reverse due to tariff uncertainty and the end of the US economy's correction, while the Thai baht may see slight depreciation from seasonal factors in Q2.
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