Bank of Thailand Raises Growth Forecasts but Warns Recovery Remains Concentrated

The Bank of Thailand raised its economic growth forecasts on October 28 as technology exports and private investment strengthened, while warning that the benefits remain concentrated and domestic purchasing power remains weak. In a recent press conference for the Monetary Policy Committee Decision, the central bank informed that now expects GDP to expand by 2.4% in 2026 and 2.1% in 2027, up from its June projections of 2.3% and 1.8%, respectively.

Its Monetary Policy Committee unanimously maintained the policy rate at 1%, judging that an accommodative stance and targeted financial measures were supporting the recovery.

“The Thai economy continues to gain momentum on the back of the technology and AI cycle,” the committee said, signed by Don Nakornthab, Assistant Governor, Monetary Policy Group. “Nevertheless, overall growth remains below potential and the benefits remain concentrated.”

Investment strengthens as consumption slows

The revised outlook projects private investment growth of 13% in 2026 and 7.6% in 2027. Merchandise export values are forecast to rise by 22% this year and 15% next year.

Household spending presents a weaker picture. Private consumption is expected to grow by 2.3% in 2026, below the June forecast of 2.6%. Although the 2027 projection was raised to 1.7%, spending growth would still slow from this year.

The BOT attributed the constraints to elevated household debt, fragile labour-market conditions and weak purchasing power. Unemployment-benefit claimants remain elevated, according to its presentation.

Credit conditions diverge

Lending data underline the uneven recovery. Large corporate loans increased by 6% year on year in August, while SME loans contracted by 1.4% and retail loans grew by 0.8%.

The central bank said overall credit quality remained stable, but repayment capacity required close monitoring, particularly among low-income earners and self-employed workers.

The baht has weakened and Thai government bond yields have risen alongside global market movements. However, the pass-through to private-sector financing costs has remained limited, and overall borrowing costs have stayed broadly stable.

The BOT said Thailand’s dependence on imported energy contributed to currency pressure, alongside shifting expectations towards a more restrictive US monetary-policy outlook. It nevertheless assessed external stability as strong.

Energy and weather remain inflation risks

Headline inflation is forecast to average 2.1% in 2026 and 1.3% in 2027, below the June projections of 2.8% and 1.4%.

Energy and raw-food prices are expected to keep inflation temporarily elevated before base effects and weak domestic demand bring it lower. Policymakers will monitor geopolitical developments, elevated oil prices, El Niño-related risks and the limited capacity of energy subsidies to contain prices.

The committee also flagged the long-term effects of low interest rates on financial stability.

Its policy presentation called for accompanying fiscal and financial measures, including debt resolution for vulnerable borrowers, liquidity support for SMEs and investment in productivity and structural transformation.

The forecasts carry an additional statistical uncertainty: they do not yet incorporate the latest revision to Thailand’s Manufacturing Production Index, which expanded coverage of electronics factories and added products including laptops and data-processing equipment.

That revision could change the assessment of manufacturing activity. For now, the BOT’s outlook shows investment and exports advancing faster than household spending, with SME credit contraction remaining a constraint on how widely the recovery spreads.