FPO cuts Thailand’s 2026 GDP forecast to 1.6% on geopolitical risks
Thailand’s Fiscal Policy Office has lowered its 2026 GDP growth forecast to 1.6%, citing geopolitical tensions, but insists the economy is not facing stagflation.
Middle East tensions weigh on energy costs and global trade
Thailand’s Fiscal Policy Office has cut its 2026 economic growth forecast to 1.6%, down from the 2.0% projection made in January, citing rising pressure from geopolitical conflicts, particularly in the Middle East.
Winit Wisetsuwannaphum, director-general of the FPO, said the conflicts had affected energy costs, travel and volatility in the global trade system, forcing the agency to revise down its outlook.
Despite the weaker forecast, Winit said the Thai economy still had support from four main engines: exports, private consumption, private investment and public spending.
Exports and investment remain key drivers
Exports are expected to expand by 6.2%, supported by demand from Thailand’s trading partners, with positive signs seen since the first quarter.
Private consumption is projected to grow by 2.3%, helped by tourism income and government measures aimed at easing the cost of living.
Private investment is forecast to rise by 3.2%, driven partly by higher investment through the Board of Investment and the acceleration of actual investment under the Thailand Fast Plus scheme, which is designed to remove obstacles for investors in targeted industries.
Government spending will also remain a key pillar of growth. Winit said the government and state enterprises continued to inject funds into the economy, with first-half disbursement reaching 117 billion baht, or 50% of the target, higher than the same period last year. The government has also raised the 2026 investment budget by around 50 billion baht.
FPO says Thailand far from stagflation
The FPO said Thailand’s economic stability remained solid, with inflation expected at 3%, still within the target range. The current account is forecast to record a surplus of around US$6 billion, or 1% of GDP.
Winit insisted that Thailand was not heading towards stagflation, a condition marked by high inflation and stagnant growth. He said investment was still expanding and GDP remained in positive territory.
However, the FPO is closely monitoring several risks, including geopolitical tensions, natural disasters, shrinking fiscal space in many countries, household and SME debt, and uncertainty over global leadership.
Targeted subsidies and stimulus under review
To cope with energy volatility, the government plans to shift assistance towards targeted subsidies while promoting a transition away from dependence on fossil fuels.
Possible tools include matching funds with the private sector and a review of investment strategy through the Thailand Future Fund.
The FPO also estimated that every additional 100 billion baht in public investment could lift GDP growth by 0.27 percentage points. Consumption stimulus measures involving public co-payment, such as the previous Khon La Khrueng scheme, were also found to be effective, with an economic multiplier of about 0.7 or higher.
The Finance Ministry is now reviewing details of the Thai Chuai Thai Plus measures, with clarity expected soon.
