BANGKOK, THAILAND – Prime Minister Anutin Charnvirakul moved to accelerate Thailand’s Net Zero goals as the US-Iran war and a global energy shock drove up inflation risks and market uncertainty.
Energy shock caught government off guard
According to the report, the Thai government was surprised by the impact of the US-Iran war and a rapidly intensifying global energy shock. As a result, inflation risks increased while overall financial conditions tightened.
Since the end of February, the situation had escalated quickly and overturned earlier expectations of a post-election recovery. The conflict sharply altered the economic outlook and injected fresh uncertainty into several areas of the economy.
Inflation rising, forecast up to 3.5%
The report described growing price pressures in multiple sectors, with increases already visible for consumers and businesses. Analysts expected a further worsening if the conflict continued.
Forecasts indicated that inflation could reach 3.5% this year, marking a clear break from developments in the first quarter. The text underlined the speed and scale of the economic shock now confronting Thailand.
Appearance at Asia Zero Emission Community summit
On Wednesday, Anutin took part in an online summit chaired by Japan’s Prime Minister Sanae Takaichi. At the Asia Zero Emission Community meeting, regional leaders discussed mounting energy challenges.
Anutin delivered a brief national statement, highlighting adaptability and resilience as responses to the crisis. He said Thailand intended to accelerate its Net Zero targets under the United Nations framework.
Energy system overhaul as political guideline
According to the report, the prime minister stressed that Thailand had to restructure domestic energy consumption to maintain security of supply. At the same time, the government aimed to prevent the population from falling into hardship.
He also confirmed that alternative energy sources would be examined and insisted on continuity in energy provision. The government framed the crisis as an opportunity for a transition, but one that would require far-reaching structural changes.
Import dependence and risk of higher power tariffs
Thailand remained heavily dependent on imported fossil fuels, meaning any rapid transition would demand substantial investment and careful planning. The report also pointed to existing infrastructure limits that could slow the pace of change.
Domestically, energy policy was described as highly sensitive, with any increase in electricity tariffs seen as a potential trigger for protest. Developments in the United States and Europe were cited as examples where voters were also reluctant to accept higher energy costs.
51% of crude oil imports from the Middle East
The crisis exposed Thailand’s reliance on energy from the Middle East. Data from the Kasikorn Research Centre showed that 51% of the country’s crude oil imports came from the region.
The report further highlighted a generally strong dependence on oil and gas from the Gulf. Global supply disruptions therefore had immediate domestic effects, with the oil price already moving toward US$100 per barrel, sharply increasing import costs and shifting inflation expectations.
Capital flows reverse from inflows to outflows
In February, sentiment had initially improved. Foreign investors bought Thai equities worth US$7 billion, supported by Anutin’s clear election victory and the strong mandate of his Bhumjaithai Party, which had raised hopes for stability and reform.
With the outbreak of war, the trend reversed. In March, equities worth US$823 million were sold, while US$705 million exited the bond market, the largest combined outflow since October 2024. Despite a temporary ceasefire, caution among investors remained dominant.
Risks for consumption, exports and tourism
Analysts warned that markets might not yet have fully priced in the energy shock. Higher fuel costs could weigh on household consumption and simultaneously disrupt exports and tourism.
These sectors were identified as key growth drivers, so persistently high energy prices would have broad consequences. Even before the conflict, growth had been weak, with Thailand expanding by only 2.4% last year and trailing regional peers.
Central bank dilemma and budget under strain
The report stated that monetary options were limited. The central bank had cut interest rates in February because of deflation, but rising inflation complicated any further easing.
Tightening policy, on the other hand, could choke off recovery, leading analysts to describe a very narrow corridor for decisions. Fiscal room was also shrinking, as public debt had reached 66% of GDP, close to the 70% ceiling.
A possible increase of the limit to 75% under the State Fiscal and Financial Disciplines Act 2018 was said to be under consideration. Such a move could raise concerns about fiscal discipline and damage confidence in the government’s financial management.
“How should Thailand in your view respond to the energy shock: keep electricity prices stable and put more burden on the state – or allow price adjustments to secure supply?”
said the article, inviting readers to comment.
“Do you believe that an accelerated Net Zero strategy is realistic in an acute crisis, or are short-term relief measures for households and businesses needed first?”
said the article, calling for further debate.