Thailand Warns of High Oil Prices for Next 1-2 Years Amid Stagflation Risks

Thailand is facing a prolonged period of high energy costs and the risk of stagflation as tensions in the Middle East continue to drive global oil prices upward. Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas stated on April 9, 2026, during a joint sitting of Parliament, that the era of cheap oil has ended and prices could remain elevated for one to two years.

The Finance Minister confirmed that the government will not implement a fuel excise tax cut to lower prices. Ekniti explained that preserving the tax base is essential for public spending, specifically citing concerns that such a cut could impact funding for healthcare services. Instead, the government intends to use the Oil Fuel Fund as the primary mechanism to cushion price pressures for the public.

Economic Risks and Stagflation Warnings

The current energy crisis has triggered significant volatility in oil prices and raised the possibility of goods shortages due to transport disruptions around the Strait of Hormuz. Ekniti warned that these conditions could intensify into a stagflationary environment, characterized by high inflation coinciding with a broader global economic slowdown.

Economists have echoed these concerns, noting that Thailand is particularly vulnerable due to its dependence on energy imports. Yunyong Thaicharoen, chief economist and sustainability officer at Siam Commercial Bank (SCB), stated that stagflation conditions are already emerging in Thailand and several other countries. He noted that Thailand’s net oil imports are estimated at approximately 8% of GDP and because energy holds significant weight in the consumer price index, global price hikes quickly impact household living costs.

Amonthep Chawla, chief economist at CIMB Thai Bank, has projected that the Thai economy could experience flat growth or quarter-on-quarter contractions in the first half of 2026. He noted that while the Bank of Thailand cut the benchmark rate to 1.00% to support the sluggish economy, monetary policy alone may be insufficient if the Middle East conflict persists for more than two months.

Growth Forecasts and Policy Responses

The SCB Economic Intelligence Centre (EIC) has revised its 2026 growth outlook for Thailand based on different conflict scenarios:

• Base Case: Assuming the conflict eases within two months, growth is projected at 1.4% with inflation at 3.2%, which is above the monetary policy target range.
• Worst-Case Scenario: If the conflict lasts four months, growth could slow to between 0.8% and 1.1%, while inflation could rise to between 4% and 5%.

CIMB Thai has identified inflation moving above 2% as a critical danger point. To manage these risks, Amonthep Chawla suggested that the government move away from blanket subsidies and instead provide targeted support for specific vulnerable groups while encouraging more efficient energy consumption.

The government is currently weighing support measures for vulnerable groups. Ekniti Nitithanprapas indicated that the government is preparing measures to assist citizens, which are expected to be proposed to the Cabinet on April 11, 2026.

Fiscal Strain and Structural Concerns

The reliance on the Oil Fuel Fund as the first line of defense comes amid reports of fiscal strain. With Brent crude surpassing $100 per barrel, the fund’s two-year survival strategy is facing significant challenges.

Beyond immediate price mitigation, there are calls for deeper systemic changes. Somchai, as reported by Manager Online, has questioned whether the government will truly reform the distorted energy structure, stating he would fully support such a move if implemented.

Finance Minister Ekniti emphasized the need for early action to prevent the current economic fallout from escalating into a crisis that echoes the economic trauma of 1997.