SCB EIC revised its 2026 forecast for Thailand’s GDP growth to 2%

SCB EIC has revised its 2026 forecast for Thailand’s economic growth to 2%, following the easing of the situation in the Middle East, 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 a K-shaped pattern, concentrated in certain sectors, especially the electronics industry which is highly reliant on imports. Meanwhile, low- and middle-income households and SMEs remain vulnerable due to slowing income and high debt levels. For 2027, the Thai economy is expected to grow at a similar rate of 1.9%, reflecting limitations in new economic drivers amidst tight financial pressures and high external risks.

The Thai economy received a short-term boost from the easing of the conflict in the Middle East, but the cost impact continues to put pressure on the economy.

The decline in oil prices, though still higher than pre-war levels, has helped mitigate the impact on businesses, particularly the tourism sector, which is expected to recover better due to lower travel costs. Meanwhile, exports, especially in the electronics industry, continue to grow, and foreign investment is expanding well. However, the effects of previously high energy and production costs are still gradually being passed on to the real economy and will put more 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 put pressure on 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, especially in markets directly affected by the war. Meanwhile, the high import 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, which are 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.

A clear K-shaped recovery is emerging, concentrated in large businesses and the technology sector, while households and SMEs remain vulnerable.

SCB EIC projects that the Thai economy is showing a clearer K-shaped recovery trend, driven primarily by large businesses and technology-related industries such as AI, data centers, electronics, and digital infrastructure. These sectors are supported by investment and exports of certain goods. However, because most of these businesses have a high proportion of imports, their positive impact on domestic supply chains, employment, and broader income is limited.

Conversely, low- and middle-income households and SMEs remain vulnerable to slow income recovery, rising production costs and living expenses, and high debt burdens. This limits consumption recovery and puts pressure on businesses that rely on domestic purchasing power, particularly small businesses and certain service sectors, impacting sales, liquidity, and debt repayment ability. The disparity in recovery between business and household sectors will be a significant constraint on 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 decree.

SCB EIC forecasts Thailand’s economy to grow by 2% in 2026, higher than its previous forecast but still lower than the previous average. This forecast 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 measures to reduce the cost of living, stimulate spending, and some investment related to the energy transition. However, the support from the “Thai Helps Thai Plus” measures will mainly 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 impact on the economy.

For 2027, SCB EIC forecasts that the Thai economy will expand at a rate similar to 2026, around 1.9% , reflecting constraints from new drivers for medium-term growth. Existing drivers remain limited by factors such as slow consumer recovery due to the deleveraging process of household debt, concentrated investment and exports with high dependence on imports, reduced government policy space, and the vulnerability of SMEs facing intense competition and tight financial conditions.

Monetary policy faces limitations; the Monetary Policy Committee is expected to maintain the policy interest rate at 1% throughout this year.

SCB EIC estimates that the Monetary Policy Committee (MPC) is likely to maintain its policy interest rate at 1% throughout 2026. Inflationary pressures are primarily driven by 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. This is due to the easing of the war situation leading to lower energy prices. Simultaneously, Thailand maintains strong external stability and high levels of international reserves, thus eliminating the need to urgently raise interest rates to control inflation and currency depreciation, as has been observed in some regional countries.

Although policy interest rates remain low, overall financial conditions remain tight, particularly for retail borrowers and SMEs, due to slowing income growth and cautious lending practices by financial institutions driven by declining loan quality and repayment ability risks. Therefore, measures to assist borrowers and increase SME access to credit, coupled with measures to enhance income-generating capabilities, will play a crucial role in improving liquidity and sustaining the economy in the coming period.

Businesses face pressure, but opportunities remain in sectors related to AI, FDI, and megatrends.

Thai businesses face significant pressure from costs that remain higher than pre-war levels, supply chain volatility, and uneven demand recovery. These factors are impacting sales, profit margins, and liquidity for many businesses, particularly those limited in passing on costs to consumers in a fragile demand environment.

SCB EIC believes that future business trends will show clearer divergence, particularly among large corporations and SMEs, as well as businesses that can adapt by reducing costs, increasing productivity, and connecting with supply chains that thrive in line with major global trends. These businesses will be able to maintain their growth, but close monitoring of cost risks and demand volatility is necessary.

Growth opportunities remain in AI-related businesses, foreign investment, and megatrends such as electronics, data centers, clean energy, food, and healthcare. These sectors are supported by new investments, technological advancements, manufacturing relocation, and long-term shifts in consumer behavior. Therefore, Thai businesses should accelerate efficiency improvements, cost restructuring, and integration into new supply chains to enhance competitiveness amidst high global economic uncertainty.

The global economy is slowing down this year amid rising global inflation and interest rates.

SCB EIC forecasts that the global economy will expand by 2.5% and 2.6% in 2026 and 2027, respectively, driven primarily by investment.
In the field of AI, electronics manufacturing countries continue to benefit. The situation in the Middle East has improved, but high uncertainty remains. Looking ahead, the US tariffs under Section 301 remain a major risk to global trade in the second half of the year. Regarding monetary policy, major central banks around the world continue to prioritize the risk of inflation exceeding their targets. SCB EIC believes the Fed will not ease monetary policy this year, maintaining interest rates at 3.5-3.75% throughout the year. Global financial conditions are expected to remain tight due to high government bond yields.

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