# Thailand’s economy grew in Q1, driven by strong demand and supply, amid favorable conditions before the Middle East conflict escalated

- Link: https://www.thailand-business-news.com/banking/305314-thailands-economy-grew-in-q1-driven-by-strong-demand-and-supply-amid-favorable-conditions-before-the-middle-east-conflict-escalated
- Published: 2026-05-05T07:22:00+07:00
- Author: Abhishek Prakash

**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.

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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](https://www.bot.or.th/en/news-and-media/news/news-20260430.html)

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