BANGKOK, Thailand – Krungthai COMPASS expects the Bank of Thailand’s Monetary Policy Committee (MPC) to keep its policy interest rate at 1.00% through the end of 2027, citing Thailand’s below-potential economic growth and an uneven recovery that benefits some sectors more than others.
Although the MPC has raised its 2026 economic growth forecast to 2.4% from 2.3%, Krungthai COMPASS says the recovery remains uneven and increasingly resembles a K-shaped economy, with stronger-performing businesses pulling ahead while others continue to struggle.
The benefits of the artificial intelligence investment cycle remain concentrated in related industries, while Thailand captures relatively little value because of its high reliance on imported components. High household debt, adjustment difficulties among small and medium-sized enterprises (SMEs) and intense competition are also limiting the recovery in purchasing power and private consumption.
Krungthai COMPASS highlighted two financial risks arising from the changing interest-rate gap between Thailand and the United States: volatility in the baht and fluctuations in foreign capital flows. The interest-rate gap widened to 317 basis points at the end of September, the widest in the region, after markets increased expectations of further US Federal Reserve rate hikes. During September 16–28, the baht weakened 0.7%, the second-largest decline in Asia after the Japanese yen.
Even when markets subsequently reduced their expectations of Fed rate increases between October 14 and 26, the baht still weakened by 0.7%, underperforming several other Asian currencies. Foreign investment flows also shifted with changing interest-rate expectations. Between September 25 and 29, foreign investors recorded combined net sales of 27 billion baht in Thai bonds and equities over three trading days. Later, between October 15 and 26, they returned as net buyers of Thai bonds, purchasing 15 billion baht.
Krungthai COMPASS said these fluctuations could complicate foreign-exchange risk management for businesses involved in international transactions and put pressure on Thailand’s external stability. It recommended close monitoring of financial-market developments.
