Thai Economy Hits Lowest Point in Q2 Before Expected Recovery

Thailand’s economy likely reached its weakest point of the year in the second quarter of 2026, weighed down by higher energy prices and travel disruptions caused by the Middle East conflict, according to the Bank of Thailand (BOT). Chayawadee Chai-anant, Assistant Governor for Corporate Relations and BOT spokesperson, said the economy slowed in Q2 compared with the previous quarter due to several external pressures, but signs suggest conditions will gradually improve in the third quarter. “The second quarter was like a perfect storm,” Chayawadee said, adding that the BOT believes Q2 marked the lowest point for the Thai economy this year. She said economic activity is expected to recover in Q3, supported by improving global demand for electronic products and the impact of government measures aimed at easing economic pressure. The slowdown in Q2 was reflected in a sharp decline in foreign tourist arrivals, particularly from the Middle East, Europe and short-haul markets. Higher energy costs led airlines to adjust flight schedules, while travel restrictions linked to regional tensions further affected tourism activity. The weaker tourism sector hit service businesses, especially hotels and restaurants, which saw reduced activity during the quarter. Private consumption also declined, mainly due to continued high living costs. Spending dropped across most categories, with hotels and restaurants among the hardest hit, despite government measures introduced in June to provide support. Industrial production also weakened, affected by refinery maintenance shutdowns, slower chemical production due to higher raw material costs, and lower demand for electrical appliances from overseas markets. However, Thailand’s export sector and private investment continued to show improvement, driven by technology-related products and rising global demand for electronics. Investment in data centers also remained a positive factor supporting growth. Imports increased significantly, particularly fuel imports as Thailand built up crude oil reserves, while imports of electronic components and electrical equipment rose in line with stronger technology exports. Government spending expanded compared with the same period last year, supported by both regular expenditure and central government investment. On economic stability, headline inflation increased from the previous quarter due mainly to higher energy prices, while core inflation rose because of increased costs for prepared food products. Thailand recorded a current account deficit during the quarter, mainly due to higher energy import costs, service-related outflows and profit and dividend repatriations in May. The labour market improved slightly from the previous quarter, although the BOT continues to monitor employment conditions in the manufacturing sector, where businesses face intense competition and rising production costs. Looking ahead, the central bank said key factors to watch include developments in the Middle East conflict, US trade policies, the recovery of tourism, the impact of high living costs on households and businesses, government measures, and possible effects from El Niño conditions. Source: Pattaya Mail