Bangkok: Analysts have raised concerns over a potential slowdown in the Thai economy, citing risks of a prolonged conflict in the Middle East and escalating trade tensions.

According to Thai News Agency, Krungsri Research and Krungthai COMPASS have highlighted that these geopolitical and economic pressures are expected to impact both global and Thai economies. Inflation is anticipated to rise due to supply-side factors, prompting the Monetary Policy Committee (MPC) to maintain a low interest rate policy.

Krungsri Research points out that the global economic landscape is fraught with challenges, underscored by renewed tensions in the Middle East and the possibility of a trade war escalation. The United States is reportedly preparing to impose tariffs on European car imports, adding to the uncertainty. In response, major central banks are maintaining interest rates, although some have hinted at possible future hikes.

While the Chinese economy continues to expand, fueled by manufacturing and exports, certain sectors such as automotive and textiles are still experiencing contraction. The uneven growth in China is mirrored by the Thai economy, which is showing signs of slowing down. Despite support from exports and government spending, consumption, investment, and tourist numbers have declined.

The outlook for the Thai economy is cautious, with the Bank of Thailand (BOT) and the Fiscal Policy Office (FPO) projecting growth of only 1.5% and 1.6% in 2026, down from 2.4% in 2025. Inflation is expected to climb to 2.9% and 3.0% this year, up from -0.1% the previous year. The MPC's decision on April 29, 2026, to maintain the policy interest rate at 1.0% reflects ongoing concerns about inflation and economic stability.

Krungsri Research suggests that while inflation may increase, it is likely to be constrained by slowing domestic demand. Credit expansion remains sluggish despite low real interest rates, indicating that the MPC is expected to keep the policy rate unchanged. Krungthai COMPASS concurs, emphasizing that the economy is expanding below its potential, and inflation pressures are largely temporary. However, the potential for a prolonged Middle East conflict and its impact on supply chains and the Thai baht remains a significant risk.