According to an analysis by Kiatnakin Phatra Securities (KKPS), Thailand’s inflation trajectory is showing signs of a turning point, with the pace of moderation slowing markedly in recent months. In March 2026, headline Consumer Price Index (CPI) data revealed a year-on-year decline of 0.08%, a less steep contraction compared to February’s -0.88%.
This moderation comes as the downward pressure from energy prices has begun to ease, following heightened tensions stemming from the Iran-Israel conflict. On a month-on-month basis, headline CPI increased by 0.60% in March, primarily due to a sharp 7.31% rise in fuel prices after the government reduced Oil Fuel Fund subsidies.
The increase in fuel costs also led to higher airfares for both domestic and international routes. For the first quarter of 2026, average headline CPI stood at -0.54% year-on-year, reflecting ongoing deflationary pressures.
Food and beverage prices contributed to the month-on-month inflation, climbing by 0.27%. The increase was largely driven by higher prices for fresh vegetables (up 2.67% MoM), meat and poultry (up 0.89%), as well as eggs and dairy (up 0.88%). These increases are attributed to rising feed costs, transportation expenses, and the impact of hot weather conditions.
On an annual basis, food and beverages remained in positive territory at 0.34% YoY. This growth was bolstered by gains in prepared foods (+1.68% YoY), non-alcoholic beverages (+1.56% YoY), and fresh vegetables (+2.23% YoY), while being offset by declines in fresh fruits (-4.67% YoY), vegetable oil (-5.55% YoY), and pork products (-0.58% YoY).
Core inflation remained relatively stable in March, rising by 0.57% YoY, a slight uptick from the previous month’s 0.56%. Prepared meals continued to be the main contributor to core inflation, up 1.68% YoY, as increased costs were passed through into ready-to-eat meal prices, including rice dishes and noodles.
Non-alcoholic beverages experienced continued price gains as well, with an increase of 1.56% year-on-year. However, persistent deflation was noted in personal care products, clothing, and household goods, keeping core inflation in check for the time being.
In light of recent developments, KKPS has sharply revised its full-year 2026 headline inflation forecast upward, from 0.2% to 3.0%. This revision is underpinned by an updated baseline oil price assumption of $92.5 per barrel. A significant factor driving this upward adjustment is the government’s policy shift to permit retail diesel prices to rise above THB 50 per litre, a departure from previous episodes where a cap of THB 35 was maintained.
This larger-than-usual adjustment introduces higher inflation sensitivity, increasing the likelihood of headline inflation approaching the 3% mark in the coming months, especially if global oil prices remain elevated.
Looking ahead, focus will be on the potential for second-round effects, particularly the transmission of higher fuel and logistics costs to raw and prepared food prices. If these costs move swiftly through the supply chain, core inflation—currently subdued at +0.57% YoY—could begin to accelerate, further propelling headline inflation through the second quarter onwards.
