HSBC notes that Thailand’s 1Q26 growth beat expectations on the back of strong electronics exports and robust private investment and consumption, supported by AI-related activity and fiscal stimulus. However, non-AI sectors face Chinese competition, and consumption is expected to cool as subsidies fade. The bank upgrades 2026 growth but cuts its 2027 forecast and sees inflation easing below 2%.

Short-term boost, medium-term headwinds

“Growth in 1Q26 exceeded expectations, accelerating to 2.8% y-o-y despite the turmoil in the Middle East. Sectors and industries that are part of the data centre and AI supply chains were particularly buoyant.”

“Goods exports from Thailand surged 15.5% y-o-y − the fastest since exports boomed during the COVID-19 lockdowns – with most of the outperformance seen in electronics. Thailand is a major producer of printed circuit boards and hard disk drives, two of the many types of hardware that make up the sophistication of a data centre.”

“We expect the economy to ride this momentum through fiscal policy. The government has issued a THB400bn loan decree (2.1% of GDP), half of which will be used to finance consumer subsidies.”

“Overall, the growth outlook has improved in 2026, but 2027 is likely to remain tough. We recently revised our 2027 growth forecast downwards to 1.7% (from 2.6%).”

“And, given the difficulty in passing higher costs on to consumers, we expect inflation to ease back to below 2% y-o-y as early as 2Q27.”

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