Thailand: Oil price

Impact of Rising Oil and Gas Prices on Thailand's Economy

UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya analyze how increasing global oil and gas prices are transforming Thailand’s economic landscape, shifting it from a period of low inflation to one marked by higher costs. Their projections for 2026 remain steady, with GDP growth at 1.8% and headline CPI at -0.3%. However, they highlight scenarios in which Dubai Oil prices between USD80 and USD100 per barrel could dampen economic growth and drive inflation upward.

Balancing Growth and Inflation Amid Oil Price Surges

Thailand is experiencing a transition from a stable, low-inflation environment to one affected by energy price shocks. The immediate consequence is a rise in headline inflation, but a key concern is how long domestic prices can remain shielded from global oil and gas increases.

Entering this latest energy shock, Thailand’s economic growth was below its potential, and inflation remained subdued. This context is important, as the current situation represents an external cost shock rather than an overheating economy.

For now, the economists maintain their baseline forecast for 2026: real GDP growth at 1.8% and average headline CPI at -0.3%. Should geopolitical tensions persist or domestic price adjustments accelerate unexpectedly, these forecasts may be revisited.

According to their models, if Dubai oil prices stay within the USD80–100 per barrel range, Thai diesel prices are expected to climb gradually, even with ongoing government interventions. Headline inflation would rise more quickly than core inflation, and economic growth would slow as households and businesses face higher energy expenses.

Ultimately, Thailand can mitigate the effects of an oil shock to some extent, but it cannot completely offset the impact of a significant and prolonged surge. In the short term, the focus remains on cushioning the blow, while over the medium term, price pass-through becomes increasingly relevant.

(This article was produced with assistance from an AI tool and reviewed by an editor.)