Thai Baht: Supply risks and FX sensitivities – UOB
UOB’s economists highlight that Thailand’s inflation outlook is shaped by supply-side factors and external variables such as Oil and USD/THB.
UOB economists stress that Thailand's inflation outlook hinges on supply factors and external elements like fuel prices, food costs, and the USD/THB exchange rate. The Ministry of Commerce forecasts 1.5%-2.5% inflation by 2026, using Dubai crude priced between USD80-90 and a USD/THB rate of 32.0-33.0. UOB warns of potential inflation spikes due to El Niño, higher fuel prices, and increased food expenses.
The forecast projects inflation to average -0.54% in Q1 2026 and climb to +2.70% in Q2 2026, before a slight decline to +2.09% in Q3 2026 and +2.33% in Q4 2026. Inflation is based on GDP growth of 1.5%-2.5%, Dubai crude averaging USD80-90 per barrel, and a USD/THB rate averaging 32.0-33.0. Key risks include a surge in meal prices, a THB3.93 electricity tariff, diesel priced between THB35-40 per liter, and the potential for a stronger El Niño event.
While the Bangkok Bank of Thailand expects limited second-round effects, reassessment will depend on sustained inflation broadening into wages, services, expectations, FX pass-through, and increased credit creation. The article advises ongoing monitoring of energy prices, geopolitical events, the Thai baht, wages, inflation expectations, and credit conditions.
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