Thailand’s central bank has cut its 2026 GDP growth forecast and warned of virtually unlimited downside risks as the ongoing Iran war disrupts tourism and drives up import costs.
Thailand’s Central Bank Warns of Severe Economic Impact from Iran War
Key Details:
- The Bank of Thailand revised its 2026 GDP growth forecast down to 1.3% (from 1.9% in December), assuming the war ends in the second half of 2026.
- Tourism from Gulf countries fell to near zero in March due to airport closures caused by Iranian attacks, with those visitors normally accounting for 7% of total tourism spending.
- Malaysian tourist numbers are also declining due to high fuel costs discouraging cross-border travel.
- Inflation is forecast to reach 3.5% under the baseline scenario; interest rate hikes are considered unlikely unless inflation persists beyond a year.
- The previously expected $12 billion current account surplus may need to be revised downward, potentially turning negative.
- Capital outflows in February and March were described as manageable, with flows returning to positive territory in April.
- Bangkok will host the IMF-World Bank autumn meetings in October 2026, which officials hope will showcase Asia’s economic resilience.
Thailand is among the world’s most exposed economies to the Iran conflict due to its heavy reliance on imported energy, and the central bank’s stark warnings highlight the broad regional economic risks if the war continues.
Thailand’s Worst-Case Economic Scenarios Amid Prolonged Iran War
If the Iran war continues beyond a few months, Thailand faces severe economic contraction, with GDP growth potentially falling to 0.2% and inflation surging to 5.8%, driven by energy shocks, tourism collapse, and capital flight.
- In a prolonged conflict scenario (6–9 months), oil prices could climb to $135–145 per barrel, triggering a global downturn and slashing Thailand’s GDP growth to 0.2% while inflation spikes to 5.8%
- If the Strait of Hormuz remains closed, disrupting over 20% of global oil shipments, Thailand’s economy could slow further, with growth potentially dipping below 1%.
- In an extreme scenario, oil prices could reach $200 per barrel, though analysts consider this unlikely; even $130+ per barrel for three months would sharply raise inflation risks.
- Foreign investors have already pulled back sharply, with $823 million net selloff in equities and $705 million in bond outflows in March — the largest combined outflow since October 2024.
- The Thai baht has depreciated nearly 3% since the war began, with forecasts predicting a slide to ฿35 per dollar if the conflict drags on.
- Tourism from Gulf countries has fallen to near zero, and Malaysian visitors are declining due to high fuel costs, both critical to Thailand’s economy.
Why It Matters: Thailand’s heavy reliance on imported energy and tourism makes it uniquely vulnerable; without policy flexibility or fiscal room, prolonged conflict could push the economy into contraction, erasing recent hopes for reviva
