BANGKOK: The war in the Middle East is in its third month and has inflicted damage on several countries, facing surging energy prices, affecting crude oil and natural gas supply and prices, and feeding through to inflation.
Chayawadee Chai-anant, assistant governor of the Corporate Relations Group at the Bank of Thailand (BoT), told a seminar at Money Expo 2026, under the theme: “Thai Economy in the Year of the Horse – Ready to Respond, Quick to Adapt”, that the Thai economy continued to face challenges and uncertainty.
Since last year, she said, the world has faced US President Donald Trump’s tariff barrier policy, which affected trading partners with trade surpluses with the United States.
And since February 2026, the economy has been disrupted by the US-Israeli war on Iran, which has changed everything completely.
This war has created volatility different from trade tariffs because of its high uncertainty, with a direct impact on oil prices and the baht.
The volatility has made it difficult for businesses, especially small businesses, to plan costs and set prices.
As a result, several engines of the Thai economy have faltered.
The tourism sector is facing a drop in flight bookings and higher costs, while domestic consumption has begun to weaken as more expensive goods make people more cautious about spending on non-essential items.
Exports remain the only engine still able to keep going, but this is limited to the technology sector, which accounts for 25% to 30% of Thai exports.
These problems have made inflation a key issue that the central bank must monitor closely.
In April 2026, inflation jumped to 2.9% from negative territory, driven by energy prices that rose as much as 30%.
“The BoT has no direct policy tools to control energy prices or war, but it must watch the pass-through of costs to consumer goods prices,” Chayawadee said.
“For example, plastic bag prices have risen by 40%, reflecting that energy costs have begun to seep deeply into every part of product prices.
“When people’s incomes cannot keep up with expenses, the problem will inevitably spread to debt.”
The concern for the Thai economy is that it has faced major crises over the past six years, from the Covid-19 lockdowns and the Russia-Ukraine war to the current conflict.
Each crisis has repeatedly “hammered” the Thai economy, which failed to recover.
Every time the economy begins to recover and get back on its feet, a new shock hits, preventing a full recovery.
It is as if the economy’s shock absorber, or “cushion”, has gradually become thinner because it has not had time to be replenished before facing another blow.
“Although Covid-19 looked more severe in terms of income disappearing entirely because of lockdowns, the current situation is a lingering injury, or a prolonged impact.
Rapid fall
“It is not a single rapid fall, but a build-up of pressure that makes recovery more difficult,” said Chayawadee.
She added that the current response could not look only at the impact of the latest round of war, but also to address problems that had accumulated earlier, especially structural problems and household debt.
These, she said, must be tackled seriously because they are among the key factors that will help strengthen the “cushion” of the Thai economy in the period ahead.
For adaptation, people should make themselves as “light” as possible through careful management of debt and expenses, including checking their debt records and prioritising expense management.
In an era of fixed income and rising expenses, people must give priority to managing expenses before thinking about saving or investing.
However, given the problems facing the Thai economy, the central bank has, in policy terms, cut the policy rate to a low level of 1% to help ease the burden on the public, while also introducing targeted measures.
These include the “Clear Debt Fast, Move Forward” scheme and SME Credit Boost, which help compensate creditors for losses so that they are more willing to lend to small and medium enterprises, as well as measures to increase collateral flexibility.
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organisations, said the global economic picture in the recent weeks had been affected by overseas conflicts.
However, major stock market indices quickly returned to new all-time highs.
What was more worrying, he said, was the “second phase” of the impact: “oil prices and raw-material shortages”.
Tariff barriers
Beyond oil, the global production sector may face a crisis because the Middle East is a source of as much as 20% of the world’s key raw materials, including plastic, fertiliser and components for chip production.
If refineries are destroyed, supply chains will be affected immensely.
As for the impact on the Thai economy, he said exports had become an interesting area at present, especially electronics and computers, which were benefitting from the global artificial intelligence (AI) boom.
This pushed up exports to the United States by as much as 40%, despite trade conflicts and tariff barriers.
“We are in an exceptionally good export phase. We benefit from the fact that they are quarrelling, and Thailand’s export sector is still an important driver.
“While people say Thailand has run out of strength and has no engine left, I personally think Thai exports can still keep going,” said Kobsak.
But from now on, the Thai economy still faces concerns over the “trade balance”, as imports have grown by as much as 35.7%, mostly capital goods and raw materials for export production.
Imports are growing faster than exports, which rose 19%, and this will have a direct impact on the baht.
“The important factor that will worsen this situation is soaring oil prices. Current import figures do not yet include the impact of new oil prices.
If oil prices rise, Thailand will have to spend more foreign currency to buy expensive oil, which will make the trade balance in the second quarter especially turn negative and put pressure on the baht,” Kobsak added.
Domestic economy
However, from a strategic viewpoint aimed at supporting the economy, he saw the baht weakening to 33 baht to 34 baht to the US dollar as positive because it would support exports, tourism and agriculture, allowing them to keep moving in a period when the domestic economy was beginning to tighten.
He agreed with the BoT’s decision to cut interest rates, saying the aim was to create a continuing effect that would weaken the currency and help push economic engines that were beginning to stall to move forward again, especially exports.
While exports are still performing well, the second engine – tourism – began showing sagging signs in April 2026 because of surging oil prices. Airlines began suffering losses, and some airlines closed.
There have been reductions in flight numbers to manage costs, and some airlines have had to raise air fares by nearly 50% to 70%. As fares have become more expensive, tourists have begun deciding to delay travel because they see tourism during this period as too costly.
He said this had caused the momentum of Thai tourism to show signs of worsening from after Songkran in April, onwards. Domestic consumption, meanwhile, had weakened noticeably. — The Nation/ANN
