Repeated crises put Thailand’s economic cushion under pressure

The war in the Middle East, which began on February 28, is entering its third month and has inflicted damage on several countries, facing surging energy prices, affecting crude oil and natural gas prices and feeding through to goods prices and inflation.

Chayawadee Chai-anant, assistant governor of the Corporate Relations Group at the Bank of Thailand (BOT), told a seminar at Money EXPO 2026, under the theme “Thai economy in the Year of the Horse: ready to respond, quick to adapt”, that the Thai economy continued to face challenges and uncertainty.

Since last year, she said, the world had faced President Trump’s tariff barrier policy, which affected trading partners with trade surpluses with the US. By February 2026, the economy had been disrupted by the Iran-US war, which changed everything completely.

This war has created volatility different from trade tariffs because of its high uncertainty, with a direct impact on oil prices and the baht. The volatility has made it difficult for businesses, especially small businesses, to plan costs and set prices.

As a result, several engines of the Thai economy have faltered. The tourism sector is facing a drop in flight bookings and higher costs, while domestic consumption has begun to weaken as more expensive goods make people more cautious about spending on non-essential items.

Exports remain the only engine still able to keep going, but this is limited to the technology sector, which accounts for 25-30% of Thai exports.

These problems have made inflation a key issue that the BOT must monitor closely. In April 2026, inflation jumped to 2.9% from negative territory, driven by energy prices that rose as much as 30%.

“The Bank of Thailand has no direct policy tools to control energy prices or war, but it must watch the pass-through of costs to consumer goods prices. For example, plastic bag prices have risen by 40%, reflecting that energy costs have begun to seep deeply into every part of product prices. When people’s incomes cannot keep up with expenses, the problem will inevitably spread to debt.”

Economic cushion against shocks is wearing thin

The concern for the Thai economy is that it has faced four major crises over the past six years, from Covid-19 and the Russia-Ukraine war to the current conflict and war. Each crisis has been like repeatedly “hammering a nail” while the Thai economy has not fully recovered.

Every time the economy begins to recover and get back on its feet, a new shock hits, preventing a full recovery. It is as if the economy’s shock absorber, or “cushion”, has gradually become thinner because it has not had time to be replenished before facing another blow.

“Although Covid-19 looked more severe in terms of income disappearing entirely because of lockdowns, the current situation is a long, lingering injury, or a prolonged impact. It is not a single rapid fall, but a build-up of pressure that makes recovery more difficult.”

She therefore said the current response could not look only at the impact of the latest round of war, but also had to address problems that had accumulated earlier, especially structural problems and household debt.

These, she said, must be tackled seriously because they are among the key factors that will help strengthen the “cushion” of the Thai economy in the period ahead.

For adaptation, people should make themselves as “light” as possible through careful management of debt and expenses, including checking their debt records and prioritising expense management. In an era of fixed income and rising expenses, people must give priority to managing expenses before thinking about saving or investing.

However, given the problems facing the Thai economy, the central bank has, in policy terms, cut the policy rate to a low level of 1% to help ease the burden on the public, while also introducing targeted measures.

These include the “Clear Debt Fast, Move Forward” scheme and SME Credit Boost, which help compensate creditors for losses so that they are more willing to lend to SMEs, as well as measures to increase collateral flexibility.

FETCO warns Thailand to prepare for a “multidimensional storm”

Dr Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organisations (FETCO), said the global economic picture in the recent period had been affected by overseas conflicts.

However, major stock market indices quickly returned to new all-time highs. What was more worrying, he said, was the “second phase” of the impact: “oil prices and raw-material shortages”.

Beyond oil, the global production sector may face a crisis because the Middle East is a source of as much as 20% of the world’s key raw materials, including plastic, fertiliser and components for chip production. If refineries are destroyed, supply chains will be affected immediately.

As for the impact on the Thai economy, he said exports had become an interesting area at present, especially electronics and computers, which were benefiting from the global “AI Boom”. This had pushed exports to the US up by as much as 40%, despite trade conflicts and tariff barriers.

“We are in an exceptionally good export phase. We benefit from the fact that they are quarrelling, and Thailand’s export sector is still an important driver. While people say Thailand has run out of strength and has no engine left, I personally think Thai exports can still keep going.”

The trade balance must be watched for currency impact

But from now on, the Thai economy still faces concern over the “trade balance”, as imports have grown by as much as 35.7%, mostly capital goods and raw materials for export production. Imports are growing faster than exports, which rose 19%, and this will have a direct impact on the baht.

“The important factor that will worsen this situation is soaring oil prices. Current import figures do not yet include the impact of new oil prices. If oil prices rise, Thailand will have to spend more foreign currency to buy expensive oil, which will make the trade balance in the second quarter especially likely to turn negative and put pressure on the baht to weaken.”

However, from a strategic viewpoint aimed at supporting the economy, he saw the baht weakening to THB33-34 to the US dollar as positive because it would support exports, tourism and agriculture, allowing them to keep moving in a period when the domestic economy was beginning to tighten.

He therefore agreed with the BOT’s decision to cut interest rates quickly in the recent period, saying the aim was to create a continuing effect that would weaken the currency and help push economic engines that were beginning to stall to move forward again, especially exports.

Tourism and consumption signal a slump

While exports are still performing well, the second engine, “tourism”, began showing negative signs in April 2026 because of surging oil prices. Airlines began suffering losses, and some airlines closed.

There have also been reductions in flight numbers to manage costs. Some airlines have had to raise air fares by nearly 50-70%.

As fares have become much more expensive, tourists have begun deciding to delay travel because they see tourism during this period as too costly and not worth it. He said this had caused the momentum of Thai tourism to show signs of worsening from after Songkran, or April, onwards. Domestic consumption, meanwhile, had weakened noticeably.

“The airline situation is one worrying factor. It directly affects the balance of Thailand’s economy in services and tourism. An era of hardship and high prices is coming, with oil prices rising from THB30 to THB50. Everyone has spending problems. People are beginning to eat at home, not travel, and not dare to travel across provinces. All of this is about consumption and tourism worsening.”

Living with an uncertain world for another two and a half years

In conditions where the global economy is facing heavy volatility from geopolitical problems, the re-emergence of trade wars and shifts in global power, he expected uncertainty to continue for at least another two and a half years.

This is the period in which President Trump continues to play a key role in creating ripples through policy and communication on social media.

The conflicts are not limited to one issue but are “multidimensional” and “multi-period” conflicts. They include a trade war through the return of Section 301 and trade pressure between China and Europe, and a technology war from competition in AI and semiconductors, or chips.

They also include restrictions on access to key technologies, a financial war involving efforts to reduce the role of the dollar in oil trading and switch to other currencies, and geopolitical war and tensions in Iran, Cuba, Venezuela and Greenland.

In addition, amid confrontation between major powers such as the US and China, there are efforts to create a “new world order” by medium-sized and small countries, including ASEAN, which are trying to come together to reduce reliance on major powers and avoid the impact of war. Heavy diplomatic moves are being made to build collective power among those who do not want to enter the conflict.

Survival strategy to face a multidimensional war

He said Thailand’s big challenge this year was not merely to chase Thai GDP growth figures to meet the 3-5% target, but to support itself so that it can “survive” and suffer the least impact from the crisis.

As for the domestic political situation, he said domestic politics remained stable. The main mission of the government and the business sector at present is to get the country through this difficult period without needing to force promises of unrealistically high growth figures. Priority should instead be given to policies that reduce the impact on the public and prepare for future competition.

Within the coalition government, policy competition has begun to intensify in preparation for the next election period, which will lead to new proposed solutions to economic problems.

In June 2026, he expected the government and related agencies to issue a new package of measures to stimulate the economy and capital markets, including tax measures and support from the Thailand Board of Investment, which will be a key factor in driving the economy in the first half of the year.

Restructuring advised, from price support to sustainability

On the use of THB400 billion in borrowing to stimulate the economy, he suggested that the government focus on “restructuring” rather than using the money only to subsidise oil prices, which could become wasted debt. One idea was to use part of the money to support a “Solar Cell Co-payment” scheme to help households and industry reduce long-term energy costs and reduce reliance on imported energy.

Thailand also needs to speed up preparations in five main areas to cope with future uncertainty: food, medicine, energy, regional transport and security.

If Thailand succeeds in attracting foreign direct investment (FDI) in electronics and advanced technology, he expected that within the next three years the Thai economy would have a chance to move from growth of 2% back to 4-5%.