Thailand’s economy is facing mounting risks as the Iran war injects fresh stagflationary pressures into the global landscape, according to the latest research from KKP Securities (KKPS). The escalating conflict has triggered a surge in energy prices and tighter financial conditions, posing significant challenges for Thailand, which relies heavily on energy imports and tourism earnings.
KKPS has revised its 2026 GDP growth forecast downward to 1.3% from 1.8%, while sharply increasing its inflation (CPI) projection to 3.0% from just 0.2%. The adjustments are underpinned by an assumption that Brent crude oil prices will average US$93 per barrel throughout the year.
Tourism, previously a crucial growth engine for Thailand, is now coming under strain. Foreign arrivals, which began 2026 on a strong note, are expected to fall below 2025 levels due to costlier jet fuel, travel disruptions, and declining traveler confidence. This downturn is likely to ripple through hotels, restaurants, and retail sectors, magnifying the broader economic impact beyond direct tourism revenues.
Meanwhile, the export sector, already fragile, faces additional headwinds. KKPS notes that much of Thailand’s recent export growth stemmed from transshipment of goods to circumvent US tariffs on Chinese imports—a channel now threatened by a new Section 301 investigation into Thai trade practices and further complicated by an expanding US trade surplus. The oil price shock only worsens this pre-existing vulnerability.
Higher energy costs will weigh on household consumption, as energy comprises roughly 14% of Thai household spending. Lower-income groups are especially affected, given already stretched finances and elevated debt. This could trigger a self-reinforcing downturn in real disposable incomes.
On the fiscal front, Thailand’s public debt is nearing the statutory 70% of GDP ceiling. While the government has allowed retail energy prices to adjust and is providing targeted relief, the space for further spending remains limited. There is a risk that additional relief measures may push debt above the threshold, especially if they fail to generate meaningful economic growth.
Unlike in previous shocks in 2022, Thailand’s central bank is expected to adopt a patient stance, as pre-war domestic demand and inflation were subdued. KKPS anticipates the Monetary Policy Committee will maintain its policy rate through the crisis, cut it to 0.75% by the end of 2026, and only begin raising rates again in 2027 as conditions improve. This reflects an intent to balance the immediate impact against the need to rebuild policy space amid ongoing energy market volatility.
