K-Research Foresees Stagflation Risk in H2

Why It Matters

Higher inflation combined with slowing growth threatens consumer purchasing power and could force the Thai government to tighten policy, affecting investors and regional trade dynamics.

Key Takeaways

• Thai inflation forecast raised to 3% for 2024
• GDP growth outlook cut to 1.2% amid higher oil costs
• Oil expected to average $90/barrel in 2026, above $60‑70 pre‑war
• Businesses restocking now could push consumer prices higher later
• IMF trims global 2026 growth to 3.1% citing oil‑driven inflation

Pulse Analysis

Thailand’s economy faces a classic stagflation scenario as oil prices remain elevated due to ongoing geopolitical friction in the Middle East. K‑Research’s projection of $90 per barrel for 2026 reflects a sustained premium over pre‑conflict levels, and short‑term spikes above $100 could exacerbate cost pressures on manufacturers. The Strait of Hormuz bottleneck further limits supply, driving raw‑material costs up and prompting firms to accelerate inventory builds in April and May, a move that typically fuels downstream price hikes.

The revised macro outlook shows inflation climbing to 3% while GDP growth could stall at 1.2%, a stark reversal from earlier expectations of modest expansion. The Thai government’s early termination of petrol subsidies, constrained by fiscal limits, leaves vulnerable households exposed to higher fuel costs. Policymakers may be forced to balance targeted relief with the risk of overheating the economy, potentially tightening monetary policy sooner than planned. For investors, the dual pressure of rising input costs and sluggish output raises concerns over corporate earnings and debt servicing.

Globally, the IMF’s downgrade of 2026 growth to 3.1% underscores how oil‑driven inflation is reshaping forecasts beyond Southeast Asia. Higher energy prices ripple through trade balances, commodity‑dependent exporters, and emerging‑market currencies. Market participants should monitor diplomatic developments in the US‑Iran dialogue, as any de‑escalation could ease oil markets and soften inflationary pressures. In the meantime, businesses and investors alike need to factor in the heightened risk of stagflation when planning capital allocation and risk management strategies.