Iran Ceasefire Brings Market Calm, but Thailand’s 2026 Economic Pain Persists

 

 

KResearch holds 2026 GDP growth target at 2.0% as sticky energy prices, US tariffs, and a markdown in tourism arrivals cloud the second-half outlook.
 

 

Thailand’s economy is bracing for a turbulent second half of 2026. KASIKORN Research Center (KResearch) is holding its full-year growth forecast at 2.0%, warning that while the immediate threat of a wider Middle East war has receded, the recovery remains fragile.

 

At a press briefing on Tuesday, the research house noted that the United States-Iran ceasefire has calmed markets but failed to undo months of structural damage to global energy prices, trade flows, and business sentiment.

 

KResearch projects that the economy expanded by 2.8% year-on-year in Q1 2026, but expects growth to slow sharply to 0.9% in Q2, before recovering to 2.7% in Q3 and easing to 1.7% in Q4. On a quarter-on-quarter seasonally adjusted basis, Q2 is forecast to contract by 1.0%, underlining a sharp loss of early-year momentum.

 

 

 

High Oil and Surging Inflation

Nattaporn Triratanasirikul, executive director of KResearch, tempered optimism over the easing of US-Iran hostilities. KResearch does not expect oil prices to return to pre-war levels of $60–70 a barrel. Instead, it forecasts Brent crude to average $90 per barrel for 2026, holding closer to $100 in the second half of the year.
 

Consequently, headline inflation—which dipped to -0.5% in Q1—is projected to climb to 3.1% in Q2 and spike to 4.8% in both Q3 and Q4 as businesses pass accumulated input costs onto consumers.

 

Nattaporn warned that while shipping risks around the Strait of Hormuz have eased, the 60-day negotiation window leaves room for disruption, particularly regarding Iran's uranium stockpile and frozen assets.

 

 

 

 

Why the Growth Target Stays at 2%

KResearch’s unchanged 2.0% forecast reflects a delicate balancing act rather than economic confidence. Strong government support—including a 400-billion-baht loan decree and the "Half-Half Plus" co-payment scheme—alongside Thailand hosting the IMF–World Bank Annual Meetings and Tomorrowland in Q4 will cushion the blow of elevated energy costs but won't reverse it.

 

An upside surprise above 2.0% would require ideal external factors: faster export growth, a permanent Iran settlement, or an easing of US tariff uncertainties. None can be assumed.

 

KResearch has already conservatively revised full-year export growth down to 8.2% (from 12.9% in 2025), bucking the double-digit optimism of other forecasters.

 

 

 

Exports Slow, Tourism Forecasts Cut

The economic picture remains highly lopsided. Thai exports surged by roughly 14% year-on-year in the first half of 2026 due to tech demand and front-loading ahead of trade deadlines.

 

However, growth will decelerate to low single digits in the second half. Impending US Section 301 and 232 tariffs on items ranging from tyres and electronics to rice and steel remain major threats heading into 2027.
 

Concurrently, tourism projections are being marked down. KResearch cut its full-year arrivals forecast to 30 million visitors, down from 33 million in 2025. Only 14 million tourists are expected in the second half, compared to 16 million in the first half.

 

Flight capacities continue to slide through September, and China remains the only major market posting strong growth while arrivals from Europe, the Americas, and the rest of the Asia-Pacific lag.

 

 

 

 

 

 

Credit Squeeze on the Ground

Behind the macro numbers, the domestic economy is feeling a sharp squeeze. Thanyalak Vacharachaisurapol, deputy managing director of KResearch, noted that while the banking system’s non-performing loan (NPL) ratio is steady at roughly 3%, this hides intense, behind-the-scenes debt restructuring.

 

Credit to SMEs and retail borrowers (housing and auto) remains in contraction due to high household debt. A KResearch survey found that 55.5% of surveyed SMEs face severe cash-flow strain and falling sales. However, stronger large-corporate borrowing for working capital and refinancing prompted KResearch to revise total credit growth up to 0.5% (from -0.7%).

 

Meanwhile, the Thai Business Sentiment Index has slipped to 42.5, with manufacturers of petroleum, chemicals, textiles, and construction materials heavily exposed to high production costs and cheap import competition.

 

 

 

 

How KResearch Compares to Peer Forecasts

KResearch’s 2.0% call places it among the market's more optimistic voices:

 

Bank of Thailand: Upgraded its forecast from 1.5% to 2.0% in early June, banking on the 400-billion-baht stimulus despite calculating that inflation could hit 5%.

 

SCB EIC: Revised its projection up to 1.7% from a previous low of 1.4%, citing resilient export data and the implementation of the loan decree.

 

Krungsri Research / IMF: Pencil in softer growth at 1.8% and 1.6% respectively, citing trade tariff pressures.

 

World Bank: Remains the most downbeat at 1.3%, identifying Thailand as one of the region's most vulnerable energy-import-dependent economies.

 

 

 

Currency and Interest Rates

On the financial front, the capital markets arm of KResearch forecasts a year-end baht value of around 33.8 against the US dollar. Persistent global inflationary pressures mean international interest rates will not fall as quickly as markets hoped.

 

Domestically, KResearch expects the Bank of Thailand to keep interest rates frozen, seeing no room for further cuts given the fragile environment but no scope for hikes either.

 

Relief over the US-Iran ceasefire should not be mistaken for an economic all-clear. Energy prices remain sticky, inflation is filtering through, and key growth engines are decelerating. Holding the GDP forecast at 2.0% relies heavily on local fiscal stimulus offsetting global headwinds—but with global trade friction and energy volatility unresolved, that target remains highly volatile.