Thai Growth ‘Not Good’ but Resilient to Wartime Shocks, Says Central Bank Chief

 

 

Bank of Thailand Governor Vitai Ratanakorn revises down inflation forecasts to 2.4% while cautioning that structural issues hamper credit access for SMEs.

 

The Bank of Thailand (BOT) has warned that the country’s projected GDP growth rate of 2.3% for this year is "not good" and reflects a persistent historical decline, though it remains significantly better than worst-case wartime projections.

 

According to Krungthep Turakij reporter Wichulada Pakdeesuwan, BOT Governor Vitai Ratanakorn detailed the central bank’s economic assessments during the 2026 Advanced Economic Journalist Capacity Development Project training session.

 

Reflecting on the macroeconomic landscape, the governor noted that while the BOT’s 2.3% growth forecast remains higher than the figures proposed by several private research houses, it remains inherently weak on a historical scale.

 

However, governor Vitai emphasised that the domestic economy has "not hit a deep bottom", comfortably avoiding the direst scenarios mapped out during the initial outbreak of the Iran conflict, when central bank models feared growth could collapse to a nadir of 1.5%.

 

The governor attributed this stability to structural resilience, highlighting the ability of domestic firms to adapt and secure alternative raw materials and energy sources, aided by global oil prices retreating far more rapidly than anticipated.

 

 

 

 

 

Uneven Recovery and K-Shaped Trajectory

Despite this overall stability, the central bank expressed profound concern regarding the highly uneven nature of Thailand’s post-crisis recovery, describing it as a distinct K-shaped trajectory.

 

Large-scale corporate entities continue to enjoy seamless access to low-cost capital markets. In stark contrast, small and medium-sized enterprises (SMEs) face severe funding barriers, whilst domestic households remain acutely vulnerable and excluded from mainstream credit facilities.

 

The governor cautioned that deeper, long-term structural impairments—chiefly a rapidly ageing population and diminishing productivity levels—continue to act as heavy drags on the nation’s underlying growth potential.

 

 

 

Easing Inflation and Balanced Policy

On price stability, the central bank observed that Thai inflation exhibits a unique structural volatility, characterised by rapid acceleration followed by equally swift declines.

 

This is driven by the Consumer Price Index (CPI) basket, where energy and food components command a heavily disproportionate aggregate weight of 35%.

 

At the latest Monetary Policy Committee (MPC) review, the BOT officially revised down its full-year headline inflation forecast to 2.4% from a previous estimate of 2.8%. The central bank confirmed that monthly inflation spikes are highly unlikely to test the 4.5% ceiling initially feared.

 

 

 

"The primary anxiety for central bankers and macroeconomists globally is inflation expectation, which can trigger a damaging wage-price spiral as escalating prices drive up wage demands," Governor Vitai explained. "However, for Thailand, the risk of entering such a cycle remains highly contained. Our institutional framework for minimum wage adjustments does not automatically or immediately scale with headline inflation, differentiating us from many western economies."

 

Addressing the broader policy stance, the governor acknowledged that implementing conventional interest rate hikes to directly combat supply-driven, oil-induced price shocks is structurally ineffective.

 

Consequently, the central bank has adopted a strategic "look through" approach, actively filtering out short-term volatility tied to shifting energy base effects.  

 

To safely nurse the wider economic recovery, the BOT is maintaining an accommodative monetary policy, holding the policy repo rate at a historic low of 1%.

 

The central bank reaffirmed that this accommodative environment is explicitly balanced against the absolute necessity of preserving financial system stability, ensuring commercial lenders remain robustly capitalised to prevent any systemic recurrence of the 1997 financial crisis.