Kiatnakin Phatra Securities (KKPS) notes in its analysis that the Thai economy remained broadly stable in March, following a period of softness in February. Export value, excluding gold, increased by 3.3% on a month-on-month seasonally adjusted (MoMSA) basis and surged 19% year-on-year, with the electronics sector serving as the main growth driver. Simultaneously, manufacturing recovered by 1.8% MoMSA, translating to a 0.8% gain over the previous year.
However, KKPS observes that the early impacts of the ongoing Middle East conflict are beginning to emerge in the economic data. Most noticeably, there has been a drop in tourist arrivals from the Middle East and Europe, and fuel imports have risen as firms sought alternative supply sources.
Exports have continued to outperform, particularly in electronics, petroleum, iron and steel, and gems and jewelry. Electronics exports benefited from stronger global technology demand, especially to the U.S. and Malaysia. Petroleum exports improved due to increased shipments within ASEAN, while gems and jewelry exports saw gains from trade with India. Conversely, exports to the Middle East contracted sharply amidst escalating geopolitical tensions.
The manufacturing sector posted signs of recovery, with production rising 1.8% MoMSA and 0.8% year-on-year. This growth was largely attributed to higher sugar output, thanks to robust sugarcane crushing, and the resumption of petroleum production following refinery enhancements. Auto production also improved, bolstered by stronger vehicle sales, while some segments, such as construction materials and rubber/plastics, continued to lag due to inventory drawdowns, supply constraints, and higher costs related to ongoing conflicts.
On the consumption front, private consumption slipped 0.8% MoMSA but remained up 3.6% year-on-year. The decline was concentrated in services, especially within the hotel and restaurant sectors. The tourism segment started to display vulnerability, with foreign tourist arrivals down 8.7% MoMSA, primarily among visitors from the Middle East and Europe due to the war.
On the other hand, non-durable goods saw increased demand, driven by higher purchases of fuel and consumer goods, some of which were likely front-loaded in anticipation of rising prices.
Thailand’s current account surplus thinned to $0.6 billion in March. While the services balance stayed positive at $0.7 billion, supported by steady tourism receipts, the trade balance slipped into a deficit of $0.1 billion, largely a result of surging electronics and gold imports. Looking ahead, KKPS expects further pressure on the current account into 2026 amid seasonal dividend repatriations, worsening terms of trade, and increasing freight costs.
Overall, while first-quarter 2026 economic indicators remain resilient, supported by robust exports and a ramp-up in durable goods deliveries, the outlook has grown more uncertain. Rising energy and other input costs are set to weigh on domestic demand, as households have limited buffers to absorb higher prices.
Manufacturing faces downside risks from both softer demand and escalating input costs, and the services sector remains exposed due to moderating tourism inflows. As a result, overall growth risks are becoming more pronounced, with inflation creeping higher on the back of elevated energy prices.
