BOT signals GDP cut to 1.3-1.7% as Middle East war pushes oil prices higher

Vitai Ratanakorn, Governor of the Bank of Thailand (BOT), said Thailand’s economy would inevitably be affected by the current period of heightened uncertainty, with the war in the Middle East continuing to drive up oil prices.

He said Thailand’s economic growth, or GDP, for this year is now expected to be revised down to 1.3-1.7% from the previous forecast of 1.9%, based on two scenarios.

If the war ends quickly following the two-week ceasefire announced by Iran and the United States, and the situation does not drag on beyond that, the economy is expected to recover in the second quarter.

In that case, Thailand’s GDP growth could be revised down to 1.7% from the earlier forecast of 1.9%, while inflation is expected to stand at 2.5%.

However, if the situation drags on until the middle of the year, Thailand’s GDP growth could fall to 1.3%. Under that assumption, inflation is projected at 3.5%.

He noted that neither of these scenarios has yet taken into account any fiscal measures that may later be introduced to support the economy.

Vitai also said the current war-driven crisis differs from the Covid-19 crisis. During the pandemic, the economy came to an abrupt halt, but it was able to recover quickly once the situation eased.