BANGKOK, Thailand – Thailand’s economy remained largely flat in the third quarter of 2026, with growth concentrated in a few sectors while flooding, constrained household finances and a fragile labour market added pressure, according to SCB Economic Intelligence Center (SCB EIC).
Investment and exports of electronics and digital-related products, along with government cost-of-living support, provided some momentum. However, the recovery has not spread evenly to households and businesses. Higher domestic fuel prices, partly reflecting Middle East tensions and rising global oil prices, have added to inflationary pressure and weakened purchasing power.
Although household debt fell to 85.2% of GDP in the second quarter, its lowest level in more than six years, SCB EIC said the decline did not necessarily signal a stronger financial position for households. Many still face limited access to credit and tight liquidity. The labour market has also shown signs of weakness. Unemployment rose during the first two months of the third quarter, with the rate among younger workers more than twice the overall rate.
Floods expected to shave 0.1% off GDP
Flooding from late September through October is estimated to reduce Thailand’s GDP growth this year by around 0.1 percentage point, SCB EIC said. The disruption may also temporarily push up inflation, particularly through higher fresh food prices, with some vegetables becoming significantly more expensive. Businesses face three main channels of impact: weaker consumer spending, interruptions to logistics and supply chains, and damage to property, inventories and business premises.
Further risks include the possibility of renewed flooding in southern Thailand towards the end of the year, despite conditions improving in much of the central region. A potential “Super El Niño” could also bring prolonged heat and drought into mid-2027, threatening agricultural output, farm incomes and water supplies. Above-average water storage in reservoirs may help cushion some of the effects.
External pressures remain significant. Middle East tensions, US trade measures and concerns over excess production capacity and the misrepresentation of product origins could weigh on trade. Domestic fuel prices may also continue rising as the Oil Fuel Fund reduces subsidies amid accumulated liabilities of around 100 billion baht.
Revised data may reshape Thailand’s growth picture
Recent revisions to economic data have improved the historical picture of industrial activity and the external accounts. The new Manufacturing Production Index series from the Office of Industrial Economics raised the reported year-on-year growth rate of industrial production to 4.4%, from around 0.5% previously. Much of the revision came from broader coverage of products and sampled factories in the electronics sector, also lifting the reported capacity utilisation rate.
The Bank of Thailand’s annual balance-of-payments review also significantly improved the recorded trade and current-account balances, mainly by adjusting import values to align with balance-of-payments accounting for electronics imported for contract manufacturing and re-export without a change of ownership. As a result, the current-account deficit for the first eight months of 2026 was revised from US$15.5 billion to US$1.3 billion.
SCB EIC said the revised data could lead to further adjustments to historical GDP figures, although the scale and direction remain uncertain. Even if past growth is revised higher, the recovery remains heavily concentrated in electronics and digital-related activity, while other sectors have not expanded at the same pace. This could make Thailand’s K-shaped recovery more pronounced.
Interest rates expected to remain at 1% through 2027
SCB EIC expects the Bank of Thailand’s Monetary Policy Committee to keep the policy rate at 1% through the end of 2027. While economic activity may improve, the recovery remains uneven and households and small and medium-sized enterprises continue to face debt burdens, financing costs and restricted access to credit. Targeted financial measures to improve access to lending for SMEs and households are therefore likely to become more important.
Higher energy costs, the pass-through of expenses to other goods and flood-related increases in fresh food prices could temporarily push headline inflation towards or above the upper end of the Bank of Thailand’s 1–3% target range from late 2026 into early 2027. SCB EIC expects inflation to ease afterwards, with the 2027 average remaining within the target range.
Global growth forecasts revised higher
SCB EIC raised its global growth forecast for 2026 to 2.6%, from 2.5%, and for 2027 to 2.7%, from 2.6%. The revision reflects greater-than-expected resilience to elevated energy prices and Middle East tensions. Investment in artificial intelligence technology is supporting US economic activity, while demand for AI-related electronics is helping manufacturing and exports in Asian economies.
However, trade tensions between the United States and China remain a risk despite an extension of their trade truce until January 10, 2027. Disputes over excess production capacity and tariffs could renew pressure on trade. Uncertainty surrounding the Middle East and the limited progress in reopening the Strait of Hormuz are also keeping energy prices elevated and inflation above target in several major economies. (Story, Photo: Prachachat Business)
