Research by Aris Dacanay, Senior ASEAN Economist, HSBC Global Investment Research
HSBC expects the Bank of Thailand (BoT) to keep monetary policy unchanged at 1.00% at the upcoming meeting on 24 June 2026 - and even potentially throughout 2026 and 2027 - due to a wobbly growth outlook.
For one, fiscal policy will need to be tightened in 2027 to keep public debt-to-GDP below the voluntary limit set by policymakers of 70%. This fiscal retrenchment then risks restricting Thailand's potential growth - requiring the private sector to take up the mantle of supporting growth.
However, this too, has its challenges. Firms have found it difficult to pass the higher input costs resulting from the Middle East conflict to consumers which, in turn, squeezes business margins. With margins tight, firms may be discouraged to expand operations or invest in new ventures in 2027.
The fact the PPI (Producer Price Index) rising much more than CPI (Consumer Price Index) and the PMI (Purchasing Managers Index) input price index increasing much more than the output price index show that firms are absorbing most of the energy shock.
This trend is prevalent among SMEs and those most exposed to the energy squeeze. This segment, along with households, has faced the double blow of tight credit and liquidity conditions.
In fact, when asked about their future performance and investments, more and more businesses are becoming apprehensive. Sentiment over future performance and investments has dipped to its lowest level since the Global Financial Crisis, barring the COVID-19 pandemic.
Cognizant that this trend could lead to a moderation in private investment in the near term, the BoT will likely keep monetary policy loose, even as inflation is expected to accelerate sooner rather than later.
One silver lining for Thailand's economy has been the outperformance of private investment, particularly from abroad, which could put a floor under how much investment could slow in Thailand.
In 2025, THB612bn of foreign direct investment (FDI) flowed into the country. At 3.2% of GDP, this is the highest seen in Thailand since 2013 in GDP terms - and FDI approvals last year were a record high. This trend has held up so far in 2026.