• Cbank deputy governor says economy to slow down in H2 due to U.S. tariffs
• Says political uncertainty not an elevated concern
• U.S. tariffs are weighing on growth
• Says softer baht would support economy
• Says need for central bank to collaborate more with government

BANGKOK, July 2 (Reuters) - Thailand's economy faces a challenging second half of 2025 due to uncertainty about U.S. tariffs, a central bank deputy governor said on Wednesday, just as the country is caught in a new wave of domestic political turmoil.

Under these circumstances, Roong Mallikamas, one of the two candidates short-listed to lead the Bank of Thailand from October, said that the central bank's monetary policy should remain accommodative to support the economy.

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"We'll see a tailing of the economic growth in the second half of this year, mainly due to the tariff effects," Roong told Reuters in an interview.

"We anticipate a marked slowdown in economic activities. I think basically the tariff effects also magnify ... our country's structural problems."

Southeast Asia's second largest economy has lagged regional peers since the pandemic, growing only 2.5% last year. The central bank forecast the economy will expand by a slower 2.3% in 2025, bogged down by high levels of household debt and tepid consumption.

A threat by the United States to impose a 36% tariff on imports from Thailand has added to the challenges facing the floundering economy. Thai Finance Minister Pichai Chunhavajira is currently in Washington for negotiations.

The talks, ahead of a July 9 deadline to negotiate a trade deal with the U.S., come as Thailand has been plunged into renewed political chaos after Prime Minister Paetongtarn Shinawatra was suspended from office by the Constitutional Court on Tuesday.

The political uncertainty is currently not an elevated concern, with government spending and trade negotiations with the U.S. likely to continue without interruption, Roong said.

After cutting interest rates in October, February and April, the Bank of Thailand last week left its key interest rate unchanged at 1.75%, outlining the need to save some policy ammunition in case the economy slowed more than expected.

Members of the BOT's monetary policy committee feel that policy should be at an accommodative level to support the economy, said Roong, who is not part of the seven-member MPC.

"I think the pause was just to say that this is to assess what we have already taken," she said. "Another issue is how to maximise the remaining policy space that we have."

"If the outlook deteriorates, if I were an MPC member, I would not be reluctant to ease," Roong said. The BOT will next review policy on August 13.

A softer baht would also support the economy, and the central bank would look to ensure that the currency's moves are not affected by non-fundamental factors, such as gold prices, she said. The baht has risen by 5.7% against the U.S. dollar so far this year.

While recent negative inflation readings did not signal the economy was in deflation, they are a "reflection of very soft demand and it's more of a concern that the momentum of the economy is rather slow," Roong said.

'DIVERT CONFRONTATIONS'

The ruling Pheu Thai party, which took power in 2023, has long been at loggerheads over rate cuts and the currency with the central bank, currently led by Governor Sethaput Suthiwartnarueput, whose five-year term ends in September.

Last year, before she became prime minister, Paetongtarn said that central bank independence was an obstacle to solving economic problems.

Roong, 56, said that there was a need for the central bank to communicate and collaborate more deeply with the government.

"When you talk early, a lot of things can be resolved before it gets to the point where it's more confrontational," said Roong, who has spent nearly three decades at the central bank.

"I would hope to divert a lot of confrontations."

Roong, who holds a Ph.D. in economics from the Massachusetts Institute of Technology, is shortlisted for the top job along with Vitai Ratanakorn, 54, president and chief executive of Government Savings Bank, Thailand's largest state-run lender.

Facing down concerns over assertive governments pushing the central bank to toe their line, Roong underlined the need for open dialogue.

"You can voice your concerns, and you can share freely what you think. I think that is independence," she said.

"It's not about going separate ways."

https://www.reuters.com/world/asia-pacific/thai-monetary-policy-must-stay-flexible-headwinds-build-central-bank-deputy-says-2025-07-02/