Bank of Thailand upgrades Thai GDP growth for 2026

The central bank on Sunday raised its 2026 Thai GDP growth forecast to 2.4% from 2.3%, and for 2027 to 2.1% from 1.8%, according to Don Nakornthab, secretary of the Monetary Policy Committee (MPC).

The upward revisions were driven by robust merchandise exports and private investment associated with the technology and artificial intelligence (AI) cycle.

The central bank also raised its export growth forecast for this year to 22% from 14%, and for next year to 15% from 4.6%.

Mr Don said the revised export projections do not take into account a possible revision to the Manufacturing Production Index (MPI), which could provide further upside to Thailand’s economic growth outlook amid the global AI boom and strong export performance.

The Office of Industrial Economics introduced a revised MPI series with broader coverage for factory integrated circuits and other electronic components, as well as notebooks and laptops, optical transceivers, and uninterruptible power supplies for data processing equipment.

Nattaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said Thailand’s economic recovery remains uneven, reflecting a K-shaped economy in which some industries benefit from growth while household purchasing power remains fragile.

K-Research is likely to revise its 2026 GDP growth forecast upwards from 2.0%, following the National Economic and Social Development Council’s similar move.

The decision depends on incoming economic data, particularly manufacturing performance and quarterly growth figures.

The revised forecast could rise to 2.3-2.4%, in line with the Bank of Thailand’s outlook, although the final projection remains subject to reassessment.

K-Research estimates flooding could shave at least 0.1 percentage point off Thai GDP growth, with revisions likely as the full impact on economic activity becomes clearer, she noted.

Rates unchanged

The MPC voted unanimously to maintain the policy rate at 1%, although one committee member was unable to attend. The committee assessed that an accommodative monetary policy stance, alongside targeted financial measures, had helped to support the economic recovery amid uneven growth.

The panel retained room to cut the policy rate if additional shocks emerge and further support for economic growth becomes necessary.

Conversely, a rate hike could be considered if the Thai economy recovers more strongly and growth converges towards its potential rate of 2.7%.

“Taking a gradual and measured approach, the MPC could raise the policy rate once Thai GDP growth reaches its potential level,” Mr Don said.

The existing spread between the Bank of Thailand and other central banks’ policy rates is unlikely to have a significant impact on the exchange rate or foreign capital flows into Thailand’s stock and bond markets, supported by the country’s strong external buffers, he noted.

Thai government bond yields have risen slightly in line with developments in global financial markets.

However, borrowing costs for private-sector loans, which remain the primary source of financing for the Thai private sector, have remained broadly stable and consistent with the policy rate, said Mr Don.

The central bank expects headline inflation to exceed 3% in the fourth quarter of this year, surpassing its target range of 1-3%, driven by rising global oil prices and the effects of El Niño. The average inflation rate for the year is forecast at 2.4%.

Stock analysts widely predicted the MPC would leave interest rates unchanged to support Thailand’s economic recovery.

“Investors expected the committee to maintain the policy interest rate at 1.00%, as the economy regains some momentum in the second half of the year, while inflation risks remain under close watch,” said Rakpong Chaisuparakul, senior vice-president at KGI Securities (Thailand).

Krungsri Securities (KSS) said headline inflation rose to 2.82% in September from 2.5% a month earlier, but remained within the target range of 1-3% despite accelerating energy prices.

Excluding energy and other volatile items, core inflation remained near the lower end of the target range, the brokerage said.

KSS said the MPC’s decision to keep interest rates unchanged would support investor sentiment towards risk assets amid a continued recovery in the Thai economy driven by investment.

“Inflation is expected to accelerate in the fourth quarter due to higher oil and food prices, but the pass-through of rising costs will be limited by weakening purchasing power,” Asia Plus Securities said in a research note.