Thailand’s 2026 growth outlook remains below potential despite an upgraded forecast, while its central bank has warned that low interest rates may compound financial risks.
At a forum Wednesday, Don Nakornthab, the Bank of Thailand’s assistant governor for monetary policy, said the Monetary Policy Committee (MPC) had discussed three areas of concern: macro-financial vulnerabilities, external vulnerabilities and inefficient resource allocation. He said prolonged low rates could encourage heavier borrowing and greater investor risk-taking, allowing financial vulnerabilities to accumulate and economic shocks to have a larger impact.
Cheap financing can also weaken market checks on businesses and investment risks, Nakornthab said. That may keep inefficient companies operating and direct capital toward projects with low expected returns, while distorting resource allocation.
The Bank of Thailand cut its policy rate by 0.25 percentage point in February, bringing it to 1%, and has kept it there since. Nakornthab said a gap between Thailand’s policy and tightening by major central banks could affect cross-border capital flows and increase exchange-rate volatility. Those risks could intensify if confidence in Thailand’s economic stability weakens.
The central bank raised its 2026 growth forecast to 2.4% from 2.3%, citing support from exports and private investment. It said growth would remain below potential. The bank estimates potential growth at 2.7%, compared with the International Monetary Fund’s (IMF) estimate of 2.5%.
A central bank task force is reviewing potential growth in light of changes to the country’s economic structure in recent years, including revisions to the manufacturing production index. The bank expects Thailand to gain moderate benefits from the global artificial intelligence investment cycle and is monitoring developments in that area.
Nakornthab said incoming economic data would guide decisions on when to adjust policy; policymakers have set no date for normalization.
