Bangkok: KKP Research has revised its 2026 GDP growth forecast for Thailand upward to 1.8%, while closely monitoring potential risks stemming from tensions in the Middle East and their impact on crude oil prices.
According to Thai News Agency, the upward revision from the previous 1.6% forecast is attributed to a stronger-than-expected economic performance in the last quarter of 2025. The growth is primarily driven by tourism, electronics exports, and political stability. However, KKP Research warns that escalating tensions in the Middle East could pose a significant risk to Thailand's economy, particularly through rising global energy prices. Being a net energy importer, Thailand could face economic challenges if oil prices exceed $120 per barrel for six consecutive months. Such a scenario could reduce GDP growth to below 0.7%, potentially leading to a technical recession, increased inflation, and a weakened trade balance, thereby impacting the Thai baht.
In a baseline scenario, KKP Research anticipates that the Middle East conflict will be short-lived, with oil prices expected to stabilize between $60-70 per barrel. However, prolonged tensions or an escalation could severely impact Thailand's economic stability. The Monetary Policy Committee (MPC) is projected to maintain the interest rate at 1.0% through 2026-2027, with a potential rate hike postponed until 2028.
While the Thai economy shows signs of improvement due to a recovering tourism sector, a surge in exports, and better political stability, it remains susceptible to external pressures. Challenges such as competition from imported goods, high household debt, and stringent lending conditions continue to hinder domestic consumption and growth.
The government's fiscal limitations also pose significant hurdles, particularly in managing energy prices. The Fuel Fund currently subsidizes fuel costs significantly, and the Electricity Generating Authority of Thailand (EGAT) faces a substantial debt burden due to accumulated electricity subsidies. Rising LNG prices could exacerbate these challenges.
In conclusion, while KKP Research maintains an optimistic outlook for Thailand's economic growth, it remains vigilant of external risks, particularly those related to global energy prices and geopolitical tensions.