MPC raises Thai growth forecast on AI and export boost

The Monetary Policy Committee (MPC) expects Thailand’s economy to grow faster than previously forecast in 2026, supported by the global technology cycle, investment in artificial intelligence and strong exports.

The MPC now projects economic growth of 2.3% this year, up from its earlier assessment, while warning that the recovery remains uneven, especially for small and medium-sized enterprises and households burdened by high debt and rising living costs.

The committee also flagged risks to the current account, which could temporarily fall into deficit because of higher oil imports and profit repatriation by foreign investors.

AI and global technology cycle support growth

Don Nakornthab, Secretary of the MPC, said the committee continued to balance economic stability with support for recovery amid global volatility, geopolitical risks and the aftermath of the energy crisis.

The MPC voted unanimously to keep the policy rate at 1.00% per year, saying the level remains appropriate to support economic recovery and manage inflation risks.

The committee upgraded its 2026 GDP growth projection to 2.3%, compared with 1.5% assessed at the April meeting. Excluding government measures, growth is expected at 1.8%.

The improved outlook reflects the upswing in the global technology cycle, particularly AI and cloud investment by major US technology companies. This has directly boosted demand for Thai electronic products and technology components.

The trend is also reflected in rising applications for Board of Investment promotion in electronics, digital industries and AI infrastructure, making exports a key growth driver for the Thai economy this year.

Easing war tensions help businesses adjust

Another factor easing pressure on the Thai economy is the improvement in the Middle East conflict, which has helped lower energy and key raw-material prices from earlier peaks.

The MPC lowered its assumption for Dubai crude oil prices this year to around US$90 per barrel, reducing production costs for businesses.

Large private-sector firms have also adapted better than expected, both in sourcing raw materials and managing shipping routes. As a result, the impact of the conflict on manufacturing and tourism has been less severe than previously feared.

Current account still under watch

Despite the stronger overall outlook, the MPC remains concerned about the current account, which could temporarily turn negative during parts of the year.

One factor is seasonal profit repatriation by foreign companies, usually concentrated between May and June, especially among Japanese firms and other major foreign investors.

Thailand also faces higher oil import costs, partly because energy prices remain elevated and the country has accelerated fuel reserves from the previous 30-60 days to around 100 days to prepare for geopolitical uncertainty.

Although Thailand’s exports of refined oil benefit from higher energy prices, the net impact remains a drag on the current account when compared with higher crude imports and larger import volumes.

SMEs and households remain fragile

The MPC acknowledged that Thailand’s recovery has not been broad-based.

SMEs still face liquidity problems and limited access to credit, while financial institutions remain cautious in lending because loan quality in some segments has weakened.

SME loans continue to contract, while households are pressured by income growth that lags behind living costs.

Household debt remains high at around 86% of GDP, limiting long-term purchasing power and potentially weighing on private consumption once government stimulus measures are gradually withdrawn.

Inflation manageable, baht under pressure

The MPC expects inflation to rise temporarily in the second half of the year because of energy prices and the impact of El Niño, which could lift fresh-food prices.

However, core inflation remains manageable, and the committee has not seen signs of entrenched inflation similar to those experienced in many developed economies.

On the baht, the MPC said the currency has weakened in line with the stronger US dollar and interest-rate differentials. The Bank of Thailand views capital movements as normal, but stands ready to manage volatility if it affects overall economic stability.

Policy mix key to long-term growth

The MPC expects Thailand’s economy to expand by around 2.3% in 2026, supported by exports, technology investment and government measures.

However, sustainable growth will require coordination between monetary policy, which remains accommodative at an appropriate level, and fiscal policy focused on raising national productivity.

Targeted support for debtors and vulnerable businesses will also be important.

Although the current account may face temporary pressure from oil imports and seasonal factors, the MPC remains confident that Thailand’s economic fundamentals and external stability are strong enough to withstand volatility ahead.