SCB EIC has revised its 2026 economic growth forecast for Thailand to 1.7%, based on the strong first-quarter expansion and support from government measures. However, economic growth remains concentrated in certain business sectors, particularly technology-related businesses, reflecting a fragile recovery. Meanwhile, the increasing risk of conflict in the Middle East is impacting the Thai economy.
The latest economic data increasingly reflects the impact of the war in the Middle East. The overall inflation rate in April accelerated to 2.9%, the highest in over three years, following rising domestic oil prices driven by market mechanisms and the passing of costs to consumers, particularly on processed food prices. Meanwhile, producer inflation accelerated much more sharply at 9.1%.
This disparity reflects that businesses are still absorbing higher costs themselves. While the pass-through of costs to consumers is expected to become more pronounced in the coming period, it will be limited amidst low economic growth, which is pressuring business profitability, especially for SMEs. Furthermore, business dynamics have deteriorated, with a contraction in new business openings and an increase in business closures during the first four months of the year. Business and consumer confidence has continued to decline sharply since March. The number of foreign tourists contracted by -7% in April and -3% in the first 17 days of May. Overall exports showed strong growth of 18.7% in March, but this was concentrated in electronics. (But the Middle Eastern market contracted by -57.1%) while imports accelerated by 35.7%, resulting in a trade deficit in the first quarter of the year.
SCB EIC has revised its 2026 Thai economic growth forecast upwards to 1.7% (from 1.4%), but noted that growth is concentrated in sectors benefiting from the AI and digital trends. Key factors in this revision include:
1) The 400 billion baht loan decree is expected to contribute approximately 0.6% to economic recovery this year, based on the assumption that 274 billion baht will be injected into the economy: 198 billion baht from support programs (such as “Thai Helps Thai Plus”), expected to alleviate short-term cost of living pressures starting in June, and approximately 76 billion baht from the clean energy transition program, expected to begin spending in the third and fourth quarters;
2) Exports and investment are projected to improve following the positive momentum in the first quarter, and the value of investment approvals and certificates issued by the BOI remains high, particularly in the AI and data center sectors; and
3) Import values are expected to increase significantly, partly reflecting the impact of rising import prices. In particular, the price of global crude oil;
4) The estimate of foreign tourists in 2026 has been revised down to 31.7 million (from 33.2 million) due to reduced flights and higher ticket prices, while tourist confidence has decreased due to concerns about safety and the fragility of purchasing power.
Thailand’s economic growth rate is projected at 1.7% this year, a significant slowdown from the 2.4% projected for 2025 and the 2.9% projected for 2024. This reflects existing economic vulnerabilities and additional pressure from the conflict in the Middle East. The average annual inflation rate for 2026 is projected to accelerate beyond the target range of 3.6%, up from a negative -0.1% in the previous year, reflecting the pressure from the war on higher production costs.
The Monetary Policy Committee (MPC) is likely to maintain its policy interest rate at 1% throughout the year, following the prolonged conflict in the Middle East and the increasing role of fiscal policy in supporting the economy.
SCB EIC projects that the Monetary Policy Committee (MPC) is likely to maintain its policy interest rate at 1% throughout the year. The prolonged conflict in the Middle East is expected to keep headline inflation above the target range for the remainder of the year. Meanwhile, the gradual implementation of fiscal policies to mitigate the impact of the war will help support domestic demand to some extent, reducing the need for the MPC to further cut interest rates to prop up the economy, especially given the limited policy space available. It is anticipated that measures to assist retail borrowers and improve SME access to credit will play a more significant role in addressing the economic impact in the coming period.
The global economy is expected to slow down somewhat in 2026 due to pressures from war, while major central banks are unable to further ease monetary policy.
SCB EIC maintains its global economic growth forecast at 2.5% in 2026. Most major economies performed well in the first quarter, driven by AI investment, while the conflict in the Middle East has not yet had its full impact. Looking ahead, the global economy is expected to slow down due to the prolonged nature of the conflict, which will keep energy prices high for an extended period, pressuring production and consumer purchasing power. SCB EIC believes the Eurozone and Japan will be significantly impacted due to their high dependence on energy imports. Meanwhile, the US economy is expected to continue growing strongly, supported by AI investment and improved labor market stability . The Chinese economy is projected to maintain growth driven by manufacturing and exports, particularly the accelerating demand for alternative energy products such as batteries and solar panels.
Major central banks will be waiting for clarity on the war situation and may not be able to further ease monetary policy this year. The U.S. Federal Reserve (Fed) is likely to keep its policy interest rate at 3.5-3.75% throughout the year (previously expected to cut once) due to higher inflation risks and improved labor market prospects . The European Central Bank (ECB) is likely to raise interest rates once to 2.25% (previously expected to remain unchanged) to anchor inflation expectations, but the ECB may be unable to raise rates significantly due to the fragility of its economy . The Bank of Japan (BOJ) is likely to raise interest rates once to 1.0% this year (previously expected to raise them twice), focusing on the potential for a slower economic growth due to the war’s impact. Overall, global financial conditions will tighten, and the prolonged war will put significant pressure on global government bond yields to rise.
The upward revision of Thailand’s 2026 economic forecast reflects the significant role of fiscal policy in supporting the economy, rather than recovery driven by structural factors. This makes the Thai economy remain vulnerable to external risks, particularly war, and rising energy and raw material costs for the remainder of the year.
