ADB flags Thailand as ASEAN’s weakest performer amid war impact

Thailand is on course to record the slowest economic growth in ASEAN this year, according to the Asian Development Bank, as the fallout from the Middle East conflict adds to mounting pressure from high energy costs, softer tourism, weak domestic demand and fading export momentum.

In its latest Asian Development Outlook for April 2026, ADB said Thailand’s economy is expected to grow by just 1.8% in 2026, before edging up to 2.0% in 2027. The bank said the worsening conflict in the Middle East has become an added drag on an economy that was already struggling with structural weaknesses at home.

ADB said the regional shock is being transmitted through several channels, including higher oil prices, supply-chain disruption, tighter financial conditions, softer tourism flows and weaker remittances. In a more severe scenario, the bank warned that prolonged disruption could cut growth in developing Asia and the Pacific by as much as 1.3 percentage points over 2026-2027 and push inflation up by 3.2 percentage points.

The report said Brent crude briefly surged above US$100 a barrel after the conflict intensified on February 28, with risks of further disruption centred on energy shipping and wider trade flows. ADB warned that if the shock were to deepen and oil prices were to spike further, the impact would extend well beyond fuel, hitting fertiliser, food costs, manufacturing inputs and transport expenses across the region.

For Thailand, the pressure is particularly acute. ADB said growth is being held back by a slowdown in tourism, the gradual loss of support from front-loaded exports, and still-fragile domestic demand. The bank noted that part of last year’s export strength came from accelerated shipments ahead of US tariff measures, a boost that is now expected to fade.

Tourism, another key engine of the Thai economy, is also seen facing a more uncertain year. Geopolitical tensions are raising travel costs, disrupting flight routes and weighing on traveller confidence, while the recovery in the Chinese market remains gradual and regional competition stays intense.

ADB also pointed to the burden of household debt as a major domestic constraint. Private consumption has remained soft as families continue to face heavy debt obligations, limiting spending power at a time when higher energy and logistics costs are feeding through the economy.

The bank said Thailand’s economy grew only 2.4% in 2025, down from 2.9% a year earlier, reflecting weak domestic demand and fewer foreign arrivals. Inflation averaged -0.1% last year, helped by lower global energy prices and state measures to cap electricity and fuel costs. But the picture has shifted sharply in 2026, with inflation now forecast at 1.3% as the new oil shock takes hold.

By comparison, ADB expects stronger growth elsewhere in the region, with Vietnam at 7.2%, Indonesia at 5.2% and India at 6.9%, underlining how far Thailand is lagging behind its peers.

Even so, the report highlighted a few brighter spots. Private investment showed early signs of recovery last year, especially in machinery and equipment, while applications for investment promotion through the BOI rose strongly in value, led by electronics, EVs, digital industries and renewable energy. ADB said these trends could help support Thailand’s longer-term expansion if momentum is sustained.

Still, the bank warned that downside risks remain substantial. These include prolonged geopolitical tensions, continuing global trade policy uncertainty, tighter fiscal constraints as public debt rises, and unresolved structural issues such as skills upgrading, domestic value-chain development and the transition to a greener and more digital economy.