BANGKOK: Thailand’s economy is being hit by what economists describe as a “cost tsunami”, as the Middle East conflict enters its third month following US and Israeli strikes on Iran on February 28, driving up energy prices and placing pressure on both businesses and households.
The Bank of Thailand warned that the impact would fall most heavily on vulnerable groups, whose energy costs are rising significantly faster than their incomes.
Small and medium-sized enterprises (SMEs), which have less resilience than large corporations in terms of liquidity and technology, are also facing increasing pressure, particularly as crude oil, petrochemicals and urea fertilisers continue to face transport disruptions through the Strait of Hormuz.
Amonthep Chawla, assistant managing director and head of research at CIMB Thai Bank, said rising diesel prices and transport costs were spreading across all goods, pushing up living costs and forcing households to tighten spending, which could weigh on the broader economy.
SMEs remain the most vulnerable group, as they are often unable to pass higher costs on to consumers. If the situation persists, it could escalate into a more severe economic problem.
Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Financial Group, said the cost surge is affecting key engines of Thailand’s economy.
Tourism has been hit by flight suspensions on Middle East routes, while higher fuel costs have pushed up airfares, which could result in fewer visitors in 2026 compared with 2025.
Exports are facing rising shipping costs, including higher freight rates, fees and insurance premiums linked to energy prices.
Domestic consumption is also weakening as higher energy costs erode purchasing power, particularly for non-essential goods, with potential knock-on effects on debt repayment and industrial production.
High-risk sectors
The Office of the National Economic and Social Development Council (NESDC) warned that Thailand could enter a second scenario in which the conflict drags on for three to five months, with oil prices rising to US$105–115 per barrel, increasing the risk of stagflation.
Industries most exposed to rising oil prices and reliance on Middle East inputs include electricity generation, natural gas production, transport, marine and coastal fisheries, and petrochemicals.
Electricity generation faces energy costs accounting for 74.7 per cent of total costs, while natural gas stands at 44.0 per cent. The transport sector has energy costs of 35.5 per cent and transport costs of 10.1 per cent, while marine and coastal fisheries face energy costs of 36.8 per cent.
Petrochemical and plastic production also face heavy exposure, with energy costs at 34.1 per cent.
Medium-risk sectors
Industries with moderate exposure include water supply, cement production, wholesale and retail trade, plastic manufacturing and fruit farming.
These sectors rely on imported refined oil and urea fertiliser, with energy costs ranging from 9.4 to 40 per cent and transport costs reaching as high as 17.2 per cent in wholesale trade.
Low-risk sectors
Lower-risk industries include steel, glass, paper and automotive manufacturing, although they still face rising costs.
Steel production has energy costs of 15.3 per cent while glass stands at 12.4 per cent and paper at 11.2 per cent.
The automotive sector has energy costs of 7.3 per cent but remains exposed to broader supply chain pressures.
Heavy reliance on imports
Thailand remains highly dependent on Middle Eastern raw materials. Imports of naphtha, used in plastic production, account for 90.2 per cent of supply.
Urea fertiliser imports stand at 71.4 per cent mainly from Saudi Arabia and Oman, affecting farmers in fruit, rice and crop sectors.
Helium imports account for 56.8 per cent, impacting electronics manufacturing and medical industries.
In the short term, policymakers are being urged to focus on easing living costs and supporting business liquidity.
Over the longer term, economists recommend accelerating the transition to renewable energy and increasing reliance on domestic production inputs, such as organic fertilisers and plastic recycling.
Transport sector raises fees
Thongyu Kongkhan, president of the Land Transport Federation of Thailand, said rising diesel prices had forced transport operators to increase service fees.
The first adjustment took place on April 1, when diesel prices reached 40 (US$1.22) baht per litre, followed by a second increase on April 6, when prices rose to 50 baht per litre.
However, many operators are still holding rates steady to avoid passing costs on to customers.
Operators are also facing rising costs for engine oil, lubricants, filters and tyres, which have increased by 20–25 per cent.
Meanwhile, demand for transport and logistics services has fallen by 15–20 per cent compared with last year, particularly in agriculture and construction.
Businesses absorb rising costs
Other companies, including Farmhouse, Mama, EssilorLuxottica, Onetouch, BJC, Big C and LG Electronics, said they are working to absorb rising costs while managing supply chains to prevent product shortages.
The situation highlights how rising energy costs are cascading across Thailand’s economy, affecting everything from production and transport to consumer prices and long-term competitiveness. - The Nation/ANN
