Thai growth slows to 1.9 per cent as energy prices counter stimulus

Thailand's economic growth decelerated sharply in the second quarter, trailing its Southeast Asian counterparts, as escalating energy costs offset robust investment and government stimulus efforts. Gross domestic product (GDP) expanded by 1.9% year-on-year in the three months ending June, according to the National Economic and Social Development Council's report released on August 17.

This figure surpassed the 1.8% median forecast in a Bloomberg survey but fell short of the 2.8% growth recorded in the preceding quarter. Despite this slower growth rate, Thailand's economic expansion is still projected to remain within the 2% to 2.5% range for 2026, as per the council's forecast.

The nation's growth remains behind that of its ASEAN peers, such as Vietnam, Singapore, and Malaysia, which are all reaping the benefits of their robust supply chains connected to the burgeoning global AI sector. Vietnam, notably, led the region with a 8.39% growth rate in the same quarter.

The Thai baht showed a slight appreciation of 0.1% against the US dollar following the GDP release. However, stock markets remained closed as of the report. The economy contracted by 0.2% on a seasonally adjusted quarterly basis, lower than economists' predictions of a 0.4% decline.

Thailand's heavy reliance on oil and gas imports from the Middle East has made it particularly vulnerable to supply disruptions stemming from the ongoing Iran conflict. Concurrently, domestic consumer demand and tourism, two major drivers of Thailand's GDP, faced a setback due to the surge in energy expenses, which dampened both household spending and business activity.

The Bank of Thailand maintained its policy interest rate at a near four-year low in June, signaling that the economy might have reached bottom in the second quarter. The central bank attributed this expectation to the easing of tensions in the Middle East and the rollout of government stimulus measures.