Thailand: Narrow rebound, steady BoT rate – UOB

UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya see Thailand’s 2Q26 starting stronger than feared, driven by exports and technology-linked investment, but with domestic demand still weak. They expect the BOT policy rate to stay at 1.00% through 2026–27, viewing inflation as supply-led and growth as uneven, with 2026 GDP risks tilted higher but a more cautious outlook for 2027.

Exports support growth, households lag

"We maintain our view that the BOT policy rate will stay at 1.00% through the end of 2026 and into 2027. The Jun MPC decision to hold unanimously at 1.00%—together with BOT’s revised 2026 GDP forecast of 2.3% and 2027 forecast of 1.8%—points to a central bank that sees growth as stronger in the near term but still uneven, and inflation as temporarily elevated by supply-side factors."

"In our view, the Apr–May data reduce recession risk and raise the probability that 2026 growth will come in above our Apr baseline, but they do not yet prove that Thailand has returned to a broad-based, self-sustaining upcycle. The recovery is still being carried by exports, technology-linked investment, and policy support. That is enough to keep BOT on hold at 1.00%, but not enough to declare the domestic economy healthy."

"Therefore, the next forecast note should reassess the 2026–27 growth and inflation path, with a bias toward a stronger 2026, a more cautious 2027, and an unchanged policy-rate profile."

"Second, this remains a supply-led inflation episode, so the policy-rate implication is a longer hold rather than a fresh easing cycle. The diagnosis matters. Higher oil, freight, transport, and input costs reduce real purchasing power and margins while lifting headline inflation."

"All in all, the actual monthly outturn for the first five months of the year warrants revisiting our baseline macroeconomic projections. The most likely adjustment is not a simple “growth upgrade” story. It is a more nuanced profile: stronger 2026 growth because exports, investment, and fiscal support have surprised to the upside; a more cautious 2027 as front-loading and stimulus fade; higher near-term headline inflation but still contained core inflation; and an unchanged BOT policy rate path at 1.00%."

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