Thailand’s economy grew in Q1 due to strong demand and supply, but signs of Middle East conflict impacts emerged, notably declining tourism and exports, alongside rising fuel imports and softening private consumption.
Summary
- Thailand’s economy expanded in the first quarter, supported by both demand and supply side factors, reflecting favorable economic conditions prior to the escalation of the Middle East conflict. In March, overall economic activity stabilized from the previous month.
– Merchandise exports and manufacturing production continued to increase, alongside an expansion in government expenditure.
– Early signs of economic impact from the Middle East conflict has begun to emerge. Tourist arrivals from the Middle East and Europe have declined sharply, exports to the Middle East and Europe contracted significantly, and fuel imports increased as firms accelerated sourcing from alternative suppliers. Private consumption also softened, particularly in hotels and restaurants, despite some front-loaded spending on fuel amid concerns over rising prices. - Headline inflation moved closer to zero from negative territory in the previous month, driven mainly by energy prices. Core inflation remained positive and broadly unchanged, suggesting limited pass‑through of cost pressures to consumer prices.
- Key issues to monitor: (1) Middle East conflict developments, (2) the extent to which businesses and households can adapt, (3) government economic stimulus measures, and (4) potential shifts in U.S. trade policy.
Thailand’s economy experienced growth in the first quarter, driven by both demand and supply-side factors. On the demand side, merchandise exports, excluding gold, continued to rise, particularly in technology-related products. Domestic demand strengthened as private consumption increased, supported by accelerated vehicle deliveries following the expiration of the EV 3.0 scheme and heightened fuel purchases toward the end of the quarter due to concerns over potential price hikes. Additionally, private investment grew, primarily in machinery and equipment, complemented by an uptick in government spending.
On the supply side, manufacturing output rose, driven by increased petroleum production following extensive refinery maintenance in the previous quarter and capacity expansions by major chemical firms. The services sector also grew, primarily fueled by trade-related activities aligned with higher production and exports. However, late in the quarter, the economy faced challenges from the Middle East conflict, resulting in a significant drop in exports to the region and a decline in foreign tourist arrivals, particularly from the Middle East and Europe.
Source : Press Release on the Economic and Monetary Conditions for March and Q1/2026
