Thailand’s stagflation worry

Thailand is heading into a harder stretch after Songkran, with economists warning that slower growth and faster price rises are starting to show at the same time. (bangkokpost.com) Bangkok Post reported last week that analysts see higher oil prices pushing inflation up while the new government has limited room for another large stimulus because public debt is already high. K-Research told the paper inflation could reach 3% and said stagflation could emerge in late second quarter or early third quarter. (bangkokpost.com 1) (bangkokpost.com 2) The Bank of Thailand’s latest outlook, published on December 17, 2025, projected gross domestic product growth of 1.5% in 2026 after 2.2% in 2025, with headline inflation at 0.3% this year. The central bank said 2026 growth would soften as private consumption moderates and merchandise exports are hit by U.S. tariffs, even as tourism gradually recovers. (bot.or.th 1) (bot.or.th 2) The International Monetary Fund struck a similar note in February, estimating Thailand’s growth slowed from 2.5% in 2024 to 2.1% in 2025 and would ease again to 1.6% in 2026. The fund said trade policy uncertainty, constrained credit growth and a slower rebound in foreign tourist arrivals were weighing on activity. (imf.org) That leaves policymakers with a narrow gap between weak demand and rising costs. The Bank of Thailand says it is coordinating with the Finance Ministry to support growth while returning inflation to target, a sign that monetary and fiscal policy are being pulled in opposite directions. (bot.or.th) The immediate pressure point is energy. Bangkok Post reported that fuel costs were already lifting food, transport and farm expenses in the days before Songkran, with vendors and drivers saying they were paying more before passing those costs on to customers. (bangkokpost.com) Thailand’s inflation problem has looked mild in headline data, which is why the current warnings are about what happens after temporary support fades. Bangkok Post’s recent reporting described the post-Songkran period as a test of how visible price increases become once freezes and subsidies no longer cushion households. (bangkokpost.com) The fiscal backdrop is tight enough that even economists warning about weaker growth are not expecting a repeat of broad pump-priming. Bangkok Post cited analysts saying high public debt limits the government’s ability to offset an external shock with fresh spending. (bangkokpost.com 1) (bangkokpost.com 2) For now, the official forecasts still show low inflation, not a 1970s-style spiral. The risk economists are describing is a shift from an economy growing too slowly into one where oil-driven price rises become harder to hide just as growth loses more momentum. (imf.org) (bangkokpost.com)