Thailand Economics: Keeping an Eye on Potential Hawkish Risks Despite an Accommodative Policy Bias

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Thailand Economics: Keeping an Eye on Potential Hawkish Risks Despite an Accommodative Policy Bias

Thailand Economic Outlook

We recently raised our 2026 GDP forecast to 2.2% (from 1.8%) on greater resilience from the energy shock, amidst some

support from the AI cycle and fiscal stimulus.

Despite vulnerabilities from higher oil dependence and some slowdown in Mar-Apr, the Thai economy proved more

resilient than expected, stabilizing in May-Jun on domestic demand, fiscal support, and exports.

Any easing of Middle East conflict-related headwinds could ease the drag on tourism, with reduced risks of a “production

cliff” from input shortages as the intermediate import surge has rebuilt inventories of parts.

Electronics export momentum could moderate in the near term, with Thailand tied to weaker segments of global

electronics demand, and overall GDP less leveraged to the electronics cycle vs other ASEAN peers. However, the boom in

data centre FDI could increase the economy’s leverage to the global AI capex cycle, though the investment cycle is not

immune to potential headwinds from weaker business sentiment, external demand, and/or cost and margin pressures.

Cyclical green shoots may have contributed to a pickup in employment growth and provide some support for consumers,

on top of the short-term boost from fiscal stimulus in Jun-Sep, with both cushioning against the drag from a continued

“oil tax” on household spending power and continued household deleveraging.

With the 9MFY26 fiscal deficit >108.9% of the full-year target, the Bt400bn emergency loan decree avoids an unwanted

fiscal contraction in the latter part of FY26, though a small negative fiscal impulse may still be unavoidable in FY27 given

the planned narrower FY27 budget deficit of 3.9% of GDP (FY26: 4.3%).