Energy Prices to Shape Inflation in Latter Half of Year
Despite a cooling of tensions between the United States and Iran, global oil prices are anticipated to remain higher than pre-conflict levels. Projections suggest Brent crude will average approximately $85 per barrel throughout 2026, with a potential dip to $80 in the latter half of the year, according to chief economist Yunyong Thaicharoen.
Domestically, the price of diesel is forecast to average 35 baht per liter this year, a notable decrease from its peak of 50.54 baht reached in April. Correspondingly, headline inflation is now projected at a more moderate 2.6% for 2026, a downward revision from the previous estimate of 3.6%. Consumer prices are expected to see a slight decline of 0.8% next year, falling below the Bank of Thailand’s target range of 1-3%.
Economic Recovery Fueled by Lower Travel Costs and Investment
While oil prices persist above pre-conflict benchmarks, their recent moderation is providing relief to businesses, particularly the tourism sector. This easing of pressure is expected to bolster demand as reduced travel expenses encourage more activity. Furthermore, export growth, especially in electronics shipments, is continuing to expand, buoyed by strong foreign investment.
In light of these positive developments, the economic growth forecast for 2026 has been revised upwards to 2%, an increase from the earlier projection of 1.5%. This improved outlook is supported by the government’s 200-billion-baht stimulus package, which includes the “Thais Help Thais Plus” initiative. For 2027, GDP growth is estimated at 1.9%, with an additional 200 billion baht allocated to promote an energy transition.
“The Thai economy is expected to grow at a subdued pace this year and next, despite fiscal support from the government through the 400-billion-baht emergency decree,” stated Mr. Yunyong. “This reflects fiscal policy space resulting in a limited contribution to GDP growth.”
Monetary Policy and Financial Conditions
Analysis indicates that the Monetary Policy Committee will likely maintain the policy interest rate at 1% throughout 2026. Inflationary pressures are primarily attributed to supply-side factors, while long-term inflation expectations among households and businesses are reported to remain stable.
“Thailand’s external stability remains robust, supported by ample international reserves, reducing the need to raise interest rates aggressively to contain inflation or currency depreciation, unlike other countries in the region,” Mr. Yunyong observed. He added that overall financial conditions remain tight, particularly for retail borrowers and small and medium-sized enterprises, due to slower income growth and cautious lending practices by financial institutions concerned about asset quality and repayment capacity.
Global Economic Outlook and Trade Risks
The global economy is projected to expand by 2.5% in 2026 and 2.6% in 2027, with investment in artificial intelligence continuing to drive momentum and benefit electronics-producing nations. Looking ahead, potential US import tariffs under Section 301 are identified as a key risk to global trade in the latter half of the year, warranting close observation.
