HSBC notes that Thailand’s economic growth in Q1 2026 exceeded expectations due to robust electronics exports and solid private investment and consumption, supported by artificial intelligence activities and fiscal stimulus. Sectors other than AI, however, face Chinese competition and consumption is expected to decline as subsidies decline. The bank increases growth in 2026, but lowers its forecast for 2027 and expects inflation to fall below 2%.

Short-term growth, medium-term difficulties

“Growth in 1Q26 exceeded expectations, accelerating to 2.8% year-on-year despite the turmoil in the Middle East. Sectors and industries that are part of the data center and artificial intelligence supply chains were particularly dynamic.”

“Thailand’s merchandise exports grew 15.5% year-on-year – the fastest since exports surged during the Covid-19 lockdown – with most of the outperformance seen in electronics. Thailand is a major producer of circuit boards and hard drives, two of the many types of equipment that make up the sophistication of a data center.”

“We expect the economy to maintain this momentum through fiscal policy. The government has issued a borrowing decree of THB 400 billion (2.1% of GDP), half of which will be used to finance consumer subsidies.”

“Overall, growth prospects have improved in 2026, but 2027 is likely to remain challenging. We recently revised down our 2027 growth forecast to 1.7% (from 2.6%).”

“Given the difficulty of passing higher costs on to consumers, we expect inflation to fall below 2% year-on-year as early as the second quarter of 2027.”

(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)