Thai Baht: Supply risks and FX sensitivities – UOB

UOB’s economists highlight that Thailand’s inflation outlook is shaped by supply-side factors and external variables such as Oil and USD/THB. The Ministry of Commerce (MoC) keeps its 2026 headline inflation forecast at 1.5%–2.5%, assuming Dubai crude at USD80–90 and USD/THB at 32.0–33.0, while UOB flags El Niño, fuel prices, and food costs as key upside risks for near-term CPI.

External drivers and FX-linked risks

"In its formal release, the MoC retained its 2026 headline inflation forecast at 1.5%–2.5%, with a 2.0% midpoint. The accompanying briefing path shows inflation averaging -0.54% in 1Q26 and +2.70% in 2Q26, before easing to a projected +2.09% in 3Q26 and +2.33% in 4Q26."

"The forecast assumes GDP growth of 1.5%–2.5%, Dubai crude averaging USD80–90/bbl, and USD/THB averaging 32.0–33.0. Key sensitivities include a possible 3%–5% increase in single-dish meal prices, an electricity tariff of THB3.93/unit, diesel at THB35–40/liter, and the risk of a stronger El Niño event whose full effect has yet to materialize."

"For Aug, the main upside risks are retail fuel prices that remain above year-ago levels, broader prepared-food and ingredient-price adjustments, higher bus fares, and fresh-vegetable prices amid a low base and the possible strengthening of El Niño. The principal offsets are slightly lower electricity tariffs and abundant fresh-fruit supply."

"This is consistent with the BoT’s assessment that second-round effects remain limited. The critical threshold for reassessment is therefore not another volatile headline print, but a sustained broadening into wage setting, market-based services prices, inflation expectations, FX pass-through, and stronger credit creation."

"We will continue to monitor energy prices, geopolitical developments, the baht, wages, inflation expectations, and credit conditions, and will revise our forecasts if the underlying dynamics change."

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