As the end of 2025 draws closer, the global economic landscape presents a complex picture of divergent growth paths, persistent policy uncertainty and shifting trade dynamics.
The International Monetary Fund projects global growth of just 3.2% in 2025 and 3.1% in 2026, a marked slowdown from the 3.3% recorded in 2024, with risks remaining tilted to the downside.
This deceleration reflects several headwinds including: elevated policy uncertainty; trade tensions, particularly between the US and China; and persistent inflationary pressure in some regions.
While the forecast for the US has been revised upward, the overall global picture remains below the historical 2000-2019 average of 3.7%.
The most significant development affecting global markets has been China’s economic slowdown, with GDP growing just 4.8% in the third quarter of 2025, the weakest pace in a year.
More concerning, fixed-asset investment in China contracted 0.5% in the first nine months of the year, marking a rare and alarming drop that reflects declining confidence in growth prospects as the country grapples with ongoing real estate slumps and trade friction with the US.
RISK IN THAILAND
Thailand faces its own set of formidable challenges as we close out 2025. The Thai economy appears headed for a more severe slowdown in the fourth quarter, potentially extending into the first half of 2026, with growth expanding by less than 1% over the next four quarters, resulting in full-year GDP growth of only 1.8% in 2025 and 1.4% in 2026.
Two major risks require urgent management from the new government of Prime Minister Anutin Charnvirakul.
First, the baht has experienced volatile movements, strengthening by more than 8% from the beginning of the year during September, before weakening in the subsequent period. The currency was trading this week around 32.70 baht per dollar, representing a 4.5% appreciation since the start of the year. Such volatility impacts trade and investment.
The second and more severe risk is fiscal, following Fitch Ratings’ downgrade of the country’s outlook to negative on Sept 24, which followed a similar move by Moody’s in April. Among the three major credit rating agencies, only S and P maintains a stable view.
The most recent adjustment had immediate market impact, with 30-year bond yields jumping from 2.08% to 2.10% and the 10-year yield increasing from 1.34% to 1.41%. Historical data shows in 50% of cases where a rating outlook was adjusted to negative, an actual credit rating downgrade followed within 1-2 years, giving Thailand limited time to improve fiscal discipline.
The key fiscal problem is government revenue growth is not keeping pace with expenditure growth. Tax revenue is increasing slowly in line with subdued economic growth, while the government faces high fixed expenditures that are difficult to reduce.
Two out of four fiscal indicators show increased risk: public debt is at 65.4% of GDP, approaching the critical 70% threshold, and revenue collection capacity growth has declined to just 1.2% per year from 3.2% previously.
Despite these challenges, there is hope for the new economic team under Finance Minister Ekniti Nitithanprapas, who has announced a comprehensive approach to revive the economy through four main dimensions. These include the “Khon La Khrueng Plus” programme providing benefits to taxpayers and upgrading stores to e-commerce systems, and government revenue reform under a new medium-term fiscal framework.
We expect the Khon La Khrueng Plus programme to inject 88 billion baht into the system, contributing an additional 0.2% to GDP growth. Combined with other measures such as increased funding for state welfare cards and tourism promotion, the overall impact is expected to improve 2025 GDP by 0.2% to 0.3%, particularly in the fourth quarter.
While this represents a good plan, providing short-term economic stimulus while enhancing long-term economic potential through investment, key constraints include the limited four-month time frame before parliament dissolution and the challenges of a minority government, which may make policy implementation difficult.
INVESTMENT STRATEGY
Given the outlook, we recommend a “selective buy” investment strategy, viewing the SET index as having opportunities to consolidate or trade in a narrow range of 1,270 to 1,320 points in the absence of new supporting factors. We must monitor stimulus measures to see if they can improve investment confidence and fund inflows.
Our investment strategy focuses on two main themes and three trading ideas. In terms of themes, we recommend earnings play stocks expected to record good second-half performance: ADVANC for strong subscriber growth and 5G monetisation, BCPG for renewable energy expansion, GULF for power generation stability, and SCC for construction materials demand. We also recommend quality dividend stocks yielding at least 2% such as PTT and TTB for defensive positioning while waiting for an economic recovery.
For investors willing to take calculated risks we recommend three trading ideas:
Stocks that could benefit from baht weakness if the currency softens, including export-oriented companies such as TU, GFPT, KCE and HANA in the food and electronics sectors.
Stocks positioned to gain from escalating US-China trade tensions through production relocation, particularly industrial estate developers such as WHA, AMATA and FTREIT that could attract manufacturers seeking to diversify away from China.
Stocks likely to benefit from stimulus measures focused on domestic consumption, including retail and consumer goods companies such as CPALL, CPAXT and BJC; companies benefiting from flood-related demand like TASCO and HMPRO; and those in tourism, industrial estates and construction materials that should see increased activity from infrastructure spending.