PATTAYA, Thailand – Thailand’s economy is expected to have passed its lowest point in the second quarter of 2026 and could gradually recover in the second half of the year, but significant risks from global trade tensions, rising energy costs, and a struggling manufacturing sector are likely to keep overall growth subdued, according to Kasikorn Research Center. Nattaporn Triratsirikul, Deputy Managing Director of Kasikorn Research Center, said the Thai economy is expected to begin improving during the third quarter, supported largely by government stimulus measures. However, uncertainty surrounding U.S. tariff policies remains a major concern and could continue to affect Thailand’s export sector throughout the remainder of the year.
Although tensions between the United States and Iran have eased, global energy prices have not fallen significantly, resulting in continued cost pressures for producers. Those higher costs are expected to filter through to consumers, with headline inflation projected to accelerate during the third and fourth quarters of 2026. Kasikorn Research maintained its forecast for Thailand’s economic growth at 2% for the year. The outlook for the manufacturing sector remains particularly challenging. Kewalin Wangpichayasuk, Deputy Managing Director of Kasikorn Research Center, said the effects of conflict in the Middle East are expected to become more visible during the second half of the year, even as conditions gradually improve.
Higher energy prices, more expensive petrochemical raw materials, U.S. trade measures, and growing competition from imported products are all expected to weigh on industrial activity. As a result, Thailand’s Manufacturing Production Index (MPI) is forecast to contract by 0.5% in 2026, marking the fourth consecutive year of decline. Tourism is also expected to face pressure in the coming months. Continued reductions in flight capacity are likely to affect visitor arrivals during the third quarter before several major international events help support recovery later in the year. Kasikorn Research forecasts approximately 30 million foreign tourist arrivals in 2026, below the 33 million recorded in the previous year. While Chinese arrivals are expected to increase, they may not be sufficient to offset declines in several long-haul markets.
Thanyalak Watcharachaisuraphon, another Deputy Managing Director at Kasikorn Research Center, said inflation is expected to average 3.1% this year as energy prices remain elevated. The Bank of Thailand’s Monetary Policy Committee is therefore expected to keep the policy interest rate unchanged at 1% throughout the year while monitoring inflation and external risks. The Thai baht is also expected to weaken slightly, ending 2026 at around 32.80 baht per U.S. dollar, compared with the current range of 32.50 to 32.60. Meanwhile, lending growth across Thailand’s commercial banking sector is expected to remain limited. Kasikorn Research revised its full-year loan growth forecast from a contraction of 0.7% to modest growth of approximately 0.5%.
The improvement is expected to be driven primarily by government-related lending and large corporate borrowers rather than retail customers and small businesses. The research center also highlighted several challenges facing the financial sector, including persistently high funding costs, uncertainty in corporate bond fundraising, and the ongoing management of non-performing loans. While Thai banks have so far prevented a sharp deterioration in bad debt levels through restructuring programs and proactive debt management, these issues remain important risks for the broader economy. Despite signs that the economy may be emerging from its weakest period, Kasikorn Research cautioned that Thailand’s recovery is likely to remain gradual and vulnerable to external shocks, particularly developments in global trade, energy markets, and international tourism.
