Bangkok (VNA) – KKP Research, the economic research unit of the Kiatnakin Phatra Financial Group, has lowered its forecast for Thailand’s gross domestic product (GDP) growth in 2026 to 1.3% from 1.8%, while raising its projection for headline inflation to 3.0% from 0.2%, warning that a prolonged oil shock could push the country toward a recession.
In its latest report, KKP Research noted that Thailand’s vulnerability goes beyond its reliance on imported crude oil and liquefied natural gas (LNG). Disruptions to shipping routes in the Middle East could also worsen shortages of fertilisers, affecting agricultural output, as well as petrochemical feedstocks, which would impact the plastics and textile industries.
The research unit stressed that the threat facing Thailand is more serious as the economy is no longer supported by the post-pandemic pent-up demand seen in 2022, while household finances are currently much weaker. According to the report, the first shock is expected to hit the tourism sector. Foreign tourist arrivals in 2026 are projected to fall to 31.2 million, down from 35.1 million, due to higher travel costs and weaker consumer confidence.
Exports are also expected to face rising shipping costs, weaker demand in key markets including the US, China, Europe and Japan, as well as risks linked to investigations under Section 301 in the US.
Another concern is household purchasing power. Energy accounts for 14% of the consumer basket, meaning higher energy prices, particularly following diesel price liberalisation, could place heavy pressure on spending, especially among low-income groups.
Public debt is also a growing risk. KKP Research warned that weaker GDP growth and additional subsidies to shield consumers could push Thailand’s public debt-to-GDP ratio beyond the 70% ceiling earlier than expected, leaving the government with less fiscal space to respond.
According to the report, the current context differs significantly from the inflation surge in 2022, when demand was supported by the post-COVID-19 recovery. This time, households are entering the shock with weaker balance sheets, while Thailand remains heavily dependent on imported energy and tourism income, making the economy more vulnerable than many regional peers if oil prices remain elevated for longer than anticipated./.
