Bangkok (VNA) – Thailand is facing a growing economic shock amid ongoing Middle East tensions, with slower growth and rising inflation driven by higher energy prices.
Bank of Thailand Governor Vitai Ratanakorn said the economy was likely to slow as many parties had assessed. The clear impact was higher inflation, affecting both businesses and households, which were beginning to face more pressure from rising costs, as well as effects on debt and liquidity.
He said this round of impact was “uneven”, with import-dependent countries affected more than exporters. Oil-importing countries in particular would be hit harder by higher energy prices, while domestic impacts were also becoming more uneven.
Vulnerable groups will be hit hardest as inflation rises and the economy slows. The business sector shows the same pattern. Large businesses have stronger adjustment capacity, liquidity and financial buffers, allowing them to manage the impact better. Smaller businesses or SMEs, which face limits in competition, innovation and liquidity, will be more affected.
Businesses and households are the groups directly absorbing the shock in terms of costs, liquidity and their ability to maintain economic activity.
The impact also differs by industry. Some sectors, such as transport and tourism, are relatively heavily affected because of energy costs and sensitivity to the economy, while some industries are less affected.
In Thailand, Vitai said, the “uneven” pattern is becoming even clearer.
“If the economy is not doing well, vulnerable people are affected more than other groups, while SMEs with limited innovation, limited competitiveness, thin profits and low liquidity are also hit hard, depending on the industry,” he elaborated, as cited by The Nation.
The economy is therefore certain to slow and needs stimulus from the government to provide support. Inflation will rise clearly and may be at 3-4% before easing late in the year. The key factor is oil prices remaining high even after the war ends; oil prices are likely to stay above pre-crisis levels, keeping pressure on inflation and causing further impact.
Inflation will begin to ease when it enters a high-base period, especially around March-April 2027. Therefore, even if the war ends, oil prices will remain higher than before the crisis, Vitai said.
Economic stimulus measures will play an important role in supporting the economy. The form needs to be considered carefully, whether it is money transfers for short-term stimulus or investment to create longer-term effects. Each approach has different advantages. Money transfers stimulate the economy immediately, but the effect disappears the following year, while investment, although slower to take effect, is more sustainable. The government may therefore need to weigh the pros and cons that would arise, he noted.
The current shock to Thailand’s economy is a “supply-side shock” or supply shock. Fiscal policy is the most effective tool, not monetary policy, which is like a broad-acting tool.
At present, assistance needs to be targeted at affected groups, such as people at the grassroots level, SMEs, small operators or energy-intensive sectors, he suggested./.
