Negative Inflation Continues in May
Consumer Prices Drop Amid Economic Pressures
Thailand’s inflation rate remained in negative territory for the second consecutive month in May 2025, with the commerce ministry reporting a 0.57 percent decline in the consumer price index compared to last year. This drop, though less severe than the anticipated 0.80 percent fall, marks the third month in a row that inflation has fallen below the central bank’s 1.0 to 3.0 percent target, signaling ongoing economic challenges for Southeast Asia’s second-largest economy.
Government Adjusts Full-Year Inflation Outlook
Forecast Now Near Zero for 2025
On June 6, 2025, the commerce ministry revised its inflation forecast for the year, lowering it to a range of 0.0 to 1.0 percent from the earlier 0.3 to 1.3 percent. Poonpong Naiyanapakorn, head of the Trade Policy and Strategy Office, noted that a slight uptick to 0.2 to 0.4 percent is expected in June, but this still falls short of the central bank’s target, raising concerns about economic recovery amidst global trade tensions.
Key Factors Behind the Price Decline
Energy Costs and Agricultural Output Impact Inflation
The ministry attributed May’s negative inflation to declining energy prices and an increase in agricultural production, particularly vegetables, which has driven down costs. Poonpong Naiyanapakorn highlighted that these factors have kept prices low, with headline inflation averaging just 0.48 percent over the first five months of 2025, while core inflation, excluding volatile food and energy, rose 1.09 percent in May, slightly above expectations.
Central Bank’s Response to Economic Trends
Interest Rate Cuts Signal Further Support
In April, the Bank of Thailand reduced its key interest rate by 0.25 points to 1.75 percent, the lowest in two years, while also trimming its 2025 growth and inflation projections due to risks from U.S. tariffs. Deputy Governor Piti Disyatat recently stated the bank is prepared to ease monetary policy further if necessary, ahead of the next meeting on June 25, emphasizing that the low inflation does not indicate weak domestic demand or deflationary pressures.
Looking Ahead for Thailand’s Economy
Navigating Challenges with Policy Adjustments
With core inflation for the first five months of 2025 at 0.95 percent, Thailand’s economic outlook remains cautious as the country grapples with global trade uncertainties. The central bank’s readiness to implement additional measures underscores its commitment to supporting growth, while the commerce ministry’s revised forecast reflects a pragmatic approach to managing expectations in a challenging economic climate in 2025.
