Thailand: Middle East shock tests growth – DBS

DBS Group Research economist Chua Han Teng reviews Thailand’s latest macro data, noting Real Gross Domestic Product (GDP) growth slowed to 1.9% year-on-year in 2Q26 from 2.8% in 1Q26, bringing 1H26 growth to 2.4%. He raises the 2026 GDP growth forecast to 2.1%, citing a less severe Middle East shock, policy support, strong Goods exports and resilient private investment, while expecting the Bank of Thailand (BoT) to keep its policy rate at 1.00%.

Growth, consumption and policy outlook

"GDP growth slowed to 1.9% yoy in 2Q26 from a strong 2.8% yoy in 1Q, bringing 1H26 growth to 2.4% yoy. We raise our 2026 growth forecast to 2.1%, due to a less severe-than-expected Middle East shock and policy support."

"Overall economic weakness in 2Q26 was driven by slower private and government consumption growth, despite strong investment expansion. Private consumption growth eased to its lowest rate since the end of 2021, but could be supported by government stimulus introduced from June 2026."

"While visitor arrivals rebounded in July 2026, sustained momentum into the year-end peak season will be key to support the recovery. Goods exports remain in solid shape and are providing strong support to the economy in 2026 amid global artificial intelligence tailwinds, while the investment upcycle remains intact in 2Q26, with growth sustaining strong momentum at close to its highest rate since 1Q15."

"We think the Bank of Thailand (BoT) will have little urgency to adjust policy in the near term. The BoT will aim to support growth, which is low and uneven, as it expects inflation to ease alongside energy prices."

"We continue to expect the BoT to keep its policy rate stable at 1.00% through the remainder of 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)