By Orathai Sriring, Kitiphong Thaichareon and Thanadech Staporncharnchai

BANGKOK (Reuters) – Thailand’s economy faces challenges in the second half of 2025 due to uncertainty regarding U.S. tariffs, according to a central bank deputy governor on Wednesday, as the country grapples with new domestic political turmoil.

In this context, Roong Mallikamas, one of two candidates shortlisted to lead the Bank of Thailand from October, emphasized the need for an accommodative monetary policy to support the economy.

“We’ll see a tailing of economic growth in the second half of this year, mainly due to the tariff effects,” Roong shared in an interview with Reuters.

“We anticipate a marked slowdown in economic activities. The tariff effects magnify our country’s structural problems.”

Southeast Asia’s second-largest economy has lagged behind regional peers since the pandemic, recording only 2.5% growth last year. The central bank predicts a slower 2.3% growth for 2025 due to high household debt and weak consumption.

A threat from the United States to impose a 36% tariff on Thai imports compounds the difficulties facing the struggling economy. Thai Finance Minister Pichai Chunhavajira is presently in Washington for negotiations.

These discussions, ahead of a July 9 deadline for a trade deal with the U.S., occur amidst renewed political chaos in Thailand following the suspension of Prime Minister Paetongtarn Shinawatra by the Constitutional Court on Tuesday.

Despite this political uncertainty, Roong noted that government spending and U.S. trade negotiations would likely proceed without interruption.

The Bank of Thailand, after cutting interest rates in October, February, and April, maintained its key interest rate at 1.75% last week, indicating a need to reserve some policy tools in case of a bigger-than-expected economic slowdown.

Members of the BOT monetary policy committee believe accommodative policy is necessary to support the economy, as expressed by Roong, who is not a member of the seven-member MPC.

“I think the pause was just to see what we have already taken,” she stated. “Another issue is how to maximize the remaining policy space we have.”

“If the outlook deteriorates, if I were an MPC member, I would not be reluctant to ease,” Roong added, with the BOT’s next policy review scheduled for August 13.

A weaker baht could also bolster the economy, and the central bank aims to ensure that currency fluctuations are not swayed by non-fundamental factors, like gold prices, according to Roong. The baht has appreciated by 5.7% against the U.S. dollar this year.

While recent negative inflation readings do not indicate deflation, they reflect weak demand, raising concerns about slow economic momentum, Roong explained.

‘DIVERT CONFRONTATIONS’

The ruling Pheu Thai party, which assumed power in 2023, has historically disagreed with the central bank on rate cuts and currency issues, currently led by Governor Sethaput Suthiwartnarueput, whose term concludes in September.

Prior to her premiership, Paetongtarn remarked that central bank independence hinders resolution of economic issues.

Roong, 56, stressed the need for the central bank to enhance communication and collaboration with the government.

“Early dialogue can resolve many issues before escalating into confrontation,” Roong, with nearly three decades at the central bank, stated. “I would hope to divert many confrontations.”

Shortlisted for the top position alongside Vitai Ratanakorn, 54, president and CEO of Government Savings Bank, Thailand’s largest state lender, Roong highlighted the importance of open dialogue amidst concerns of assertive government influence over the central bank.

“Independence means being able to voice concerns and share opinions freely. It’s not about going separate ways,” Roong concluded.