Thailand: Oil shock lifts inflation risk – UOB

UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya assess how higher global Oil and gas prices are shifting Thailand from a low-inflation backdrop into a cost-shock environment. They keep 2026 baseline GDP at 1.8% and headline CPI at -0.3% but outline scenarios where Dubai Oil at USD80–100/bbl softens growth and lifts inflation.

Oil-driven trade-off for growth and prices

"Thailand has moved from a pure low-inflation story back into an energy-shock environment. The immediate effect is higher headline inflation, but the bigger macro question is how long domestic prices can stay insulated from the rise in global oil and gas prices."

"Thailand entered the latest energy shock with growth below potential and inflation still unusually soft. That starting point matters. The current episode should be read as an external cost shock rather than a sign of overheating."

"At this stage, we keep our 2026 baseline unchanged at 1.8% real GDP growth and -0.3% average headline CPI. That said, if geopolitical tensions stay elevated for longer, or if domestic price pass-through accelerates more than expected, we will reassess the forecast."

"In our working scenarios, Dubai oil in the USD80–100/bbl range would likely push Thai diesel prices higher over time, even with continued policy cushioning, while headline inflation rises faster than core and growth softens as households and firms absorb higher energy costs."

"All in all, Thailand can cushion an oil shock, but it cannot fully suppress a large and prolonged one. The near-term story is still about smoothing. The medium-term story is about pass-through."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)