BANGKOK, THAILAND – Thailand’s central bank kept its key interest rate unchanged as the war in the Middle East weighs on the economy, with rising energy costs and geopolitical tensions dimming the outlook for the year.
Central Bank Holds Interest Rate Steady
The Monetary Policy Committee voted unanimously on April 29 to keep the benchmark rate at 1.00 percent. The decision reflects the uncertain global situation and weakened domestic growth.
The Bank of Thailand now expects economic growth of only 1.5 percent for 2026. The Middle East conflict has raised production costs and squeezed household purchasing power.
Inflation Threatens to Breach Target
Experts forecast an average inflation rate of 2.9 percent for 2026. At times, the rate could exceed the critical three-percent mark.
“The MPC said price pressures are largely supply-driven, led by higher global energy costs.”
said the committee. Thailand’s reliance on energy imports makes it highly vulnerable to global price swings.
Grim Scenarios for the Future
In the worst case, the conflict could last all of 2026 and severely disrupt supply chains. A blockade of the Strait of Hormuz would keep energy prices persistently high.
“The committee said the current policy rate remains appropriate but warned of upside risks to inflation from prolonged conflict, persistently high energy prices and supply disruptions.”
the official statement said. Banks remain very cautious in lending to high-risk customers.
Exports Support Weak Economy
Exports provided a bright spot, rising 18.7 percent in March to over 35 billion US dollars. Electronics and technology products from Thailand continue to see strong global demand.
However, shipments to key markets such as China and the Middle East declined noticeably. Industrial confidence fell to 88.6 points.
Tourism and Consumption Under Pressure
Tourism weakened, with a 5.2 percent drop compared to the previous month. Real agricultural income also fell sharply by 4.1 percent.
Despite the crises, the country’s financial stability remains strong with high reserves of 280.5 billion US dollars. The government is now trying to lift growth above three percent through targeted fiscal incentives.
Risks for Thai Households
People in Thailand feel the global crises directly through rising prices at the pump and in supermarkets. Uncertainty over the duration of the conflicts is weighing on consumer confidence and holding back vital investments.