SCB EIC has revised its forecast for Thailand's economy this year to 2% following the easing of the situation in the Middle East. However, the Thai economy is still recovering in a K-shaped pattern, concentrated in sectors highly reliant on imports. Households and SMEs remain vulnerable amidst slowing incomes and high debt levels. KResearch 'Indicates' a gradual recovery in the Thai economy in the second half of the year.K Research indicates that the Thai economy will gradually recover in the second half of the year.

Executive of SCB EIC said We has revised its forecast for Thailand's economy in 2026 to 2%, following the easing of the Middle East situation, which has led to lower energy prices, alleviating travel costs and supporting the recovery of the tourism sector. Exports and investment in certain industry groups also continue to expand well. However, the Thai economy is likely to slow down in the coming period due to the impact of higher energy and raw material costs from the previous conflict, which is now affecting production costs, inflation, and purchasing power.

Even with additional government support, particularly the 400 billion baht loan decree, the recovery remains K-shaped, concentrated in certain sectors, especially the electronics industry which is highly reliant on imports. While low- and middle-income households and SMEs remain vulnerable due to slowing income and high debt levels, the Thai economy is projected to grow at a similar rate of 1.9% by 2027, reflecting limitations in new economic drivers amidst tight financial pressures and high levels of external risks.

The Thai economy received short-term support from the easing of the Middle East conflict, but cost impacts continue to pressure the economy. The decline in oil prices, although still higher than pre-war levels, mitigated the impact on businesses, particularly the tourism sector, which is expected to recover due to lower travel costs. Exports, especially the electronics industry, continue to grow, and foreign investment expands well. However, the impact of previously rising energy and production costs continues to be transmitted to the real economy and will put more significant pressure on economic activity from the second quarter onwards.

SCB EIC estimates that these impacts will be transmitted to the Thai economy through three main channels: (1) Energy and production costs will pressure inflation, the cost of living, household purchasing power, and affect business profit margins, especially those that are energy-intensive and logistics-intensive; (2) A slowdown in the global economy will affect exports due to weaker global purchasing power; In particular, markets directly affected by the war, while high imported energy prices in the preceding period and the accelerating trend in capital goods imports will put pressure on the trade balance and current account balance, likely to worsen significantly this year; and (3) tighter financial conditions due to volatility in financial markets and capital flows, resulting in a higher risk premium and yield curve.

The K-shaped recovery is becoming clearer, concentrated in large businesses and technology sectors, while households and SMEs remain vulnerable. SCB EIC sees the Thai economy showing a clearer K-shaped recovery trend, with the main drivers concentrated in large businesses and technology-related industries such as AI, data centers, electronics, and digital infrastructure, supported by investment and exports of certain product groups. However, most of these businesses have a high proportion of imports, limiting the positive impact on domestic supply chains, employment, and broader income. Conversely, low-to-middle-income households and SMEs still face vulnerability from slow income recovery, rising production costs and living expenses, as well as high debt burdens, resulting in limited consumption recovery and putting pressure on sales, liquidity, and debt repayment ability for businesses that rely on domestic purchasing power, especially small businesses and some service sectors. The disparity in recovery between business sectors and households will be a significant limitation of the Thai economy in the coming period. The Thai economy is projected to grow at a low rate in 2026-2027, despite government support through the 400 billion baht emergency loan decree. SCB EIC forecasts Thai economic growth at 2% in 2026, higher than its previous forecast but still below the previous average. This is driven by better-than-expected first-quarter economic figures, the easing of the situation in the Middle East, and government support, particularly the 400 billion baht loan decree, which will help support the economy through cost-of-living reduction measures, stimulate spending, and some investment related to the energy transition. However, the support from the "Thai Helps Thai Plus" measures will primarily boost economic activity in the short term, before this momentum slows towards the end of the year. The clarity of the energy transition measures still needs to be monitored to assess their economic impact.

For 2027, SCB EIC forecasts Thai economic growth at a similar rate to 2026, around 1.9%, reflecting limitations on new drivers for medium-term growth. Existing drivers remain constrained, including slow consumption recovery due to the deleveraging process of household debt, and investment and exports that are concentrated and highly dependent on imports. Government budgets have limited policy space, and SMEs remain vulnerable, facing intense competition and tight financial conditions.

Money policy is constrained; the Monetary Policy Committee (MPC) is expected to keep the policy interest rate at 1% throughout this year. SCB EIC estimates that the MPC is likely to maintain the policy interest rate at 1% throughout 2026. Higher inflationary pressures stem mainly from supply-side factors, and long-term inflation expectations among the public and businesses remain unaffected. SCB EIC revised its average inflation forecast for this year down from its previous view to 2.6%, remaining within the target range, following the easing of the war situation which has led to lower energy prices. Meanwhile, Thailand maintains stability in various aspects.

Ms. Nataporn Treerat Sirikul, Deputy Managing Director of Kasikorn Research Center, stated that the Thai economy is likely to have passed its lowest point in the second quarter of 2026 and gradually recover in the second half of the year, especially in the third quarter, driven by government measures. However, economic risks remain due to uncertainty surrounding US tariffs, which may affect Thai exports for the remainder of the year. Furthermore, even with the resolution of the Iranian conflict, global energy prices are not expected to fall rapidly, meaning that the pass-through of producer costs to consumer goods will continue. General inflation is expected to peak in the third and fourth quarters of the year.

Ms. Thanyalak Vacharachaisurapol, KResearch Deputy Managing Director, added that the loan trend in the Thai commercial banking system during the second half of the year has limited potential for recovery. Although KResearch has revised its 2026 loan growth forecast from an initial contraction of 0.7 percent to a modest expansion of around 0.5 percent, this growth primarily reflects lending to the government and large corporates rather than retail borrowers.

Furthermore, factors that warrant monitoring for the business sector include funding costs that may stay elevated, the success rate of fundraising through the bond market, and the non-performing loan (NPL) issue within the Thai banking system – which currently relies heavily on debt restructuring and proactive debt management to prevent overall NPL figures from deteriorating too rapidly.

Although KASIKORN RESEARCH CENTER (KResearch) has maintained its Thailand’s 2026 GDP growth forecast at 2.0 percent, it views that the GDP may have bottomed out in the second quarter of 2026. However, energy prices that are expected to stay high for longer will cause inflation to accelerate further during the second half of 2026, bringing average inflation rate for 2026 to 3.1 percent. Meanwhile, the Monetary Policy Committee (MPC) is expected to monitor the situation and maintain the policy rate at 1.0 percent. As for the Thai Baht, it may weaken further in line with Thailand’s economic fundamentals, ending 2026 at around 32.80 Baht per US dollar, compared with approximately 32.50–32.60 Baht per US dollar at present.

Go To Lead