Thai 2026 growth faces small drag from Middle East conflict, but buffers still hold

Summary

Thailand’s central bank expects the Middle East conflict to shave a small 0.1–0.2 percentage points off 2026 GDP growth, mainly through weaker tourism and higher energy costs. Officials say the country’s external buffers and policy tools give them space to manage the shock without sharp moves.

Recount of events

Bank of Thailand governor Vitai Ratanakorn said on 4 March that the fighting in the Middle East is likely to trim Thailand’s 2026 growth by around 0.1–0.2 percentage points. He stressed that the country’s external position is strong and that authorities can adjust policy or roll out extra financial measures if needed.

In late February, the central bank cut its key policy rate to support activity. Growth in 2026 is forecast at about 2 per cent, though Vitai has indicated he would like to see it closer to 2.7 per cent if conditions allow. He added that inflation remains a concern but should be manageable under current settings.

The Joint Standing Committee on Commerce, Industry and Banking has kept its 2026 GDP forecast in a 1.6–2 per cent range, while warning that a prolonged conflict could hurt more, especially via oil prices and tourism. Thailand’s economy grew 2.4 per cent in 2025, helped by a 12.9 per cent rise in exports, but it has lagged some regional peers since the pandemic.

Short‑term tourism data are already softening. Foreign arrivals fell 23 per cent in the week of 23 February to 1 March compared with the previous week. Visitors from the Middle East dropped by more than 60 per cent and those from Europe by over 25 per cent. Year‑to‑date foreign visitors are down 4.4 per cent from a year earlier, at 6.6 million.

On the policy side, Prime Minister Anutin Charnvirakul announced that domestic diesel prices would be frozen at 29.94 baht (S$1.21) per litre for at least 15 days from 4 March. The government says Thailand has oil reserves covering roughly 60 days of consumption and is preparing measures to cushion any further disruption.

Analysis

From an ASEAN perspective, Thailand’s situation shows how a relatively small external shock can still complicate an already uneven recovery. The forecast hit to growth is modest, but the pressure on tourism and energy costs lands directly on households, SMEs and the fiscal position.

For now, Bangkok is signalling calm: it is using interest‑rate cuts and temporary fuel support to smooth the impact, while pointing to strong external buffers. The risk is that if conflict and higher oil prices persist, these short‑term measures may need to be extended or deepened, raising questions about how to pay for them and how long they can sit alongside longer‑term reform goals.

For neighbours such as Indonesia, the Thai case is a reminder that even when the region is far from the battlefield, demand for travel and imported energy can still move quickly. Policy makers will be watching not only Thailand’s final growth number in 2026, but also how consistently it manages the trade‑off between supporting demand and keeping its fiscal and inflation story credible.