Monthly economic update: March 2026
Executive summary
Global Economy
- Middle East tensions have become a global focal point following US and Israeli strikes on Iran, which have sparked a broader regional escalation, including attacks on energy infrastructure. Oil prices have surged, reflecting patterns seen in previous supply shocks. Historically, prices tend to remain elevated for several months before gradually normalizing. In addition, Other commodity prices are beginning to rise alongside oil prices, raising the risk of potential shortages.
- Recent US economic data have suggested a continuing slowdown, especially in labor market, but oil-driven inflation risks keep the Fed cautious. China’s data showed a stronger-than-expected start to the year. Nonetheless, China set its 2026 growth target at 4.5–5% — the lowest since 1991 and the first cut since 2023 amid Middle East risks.
Domestic Economy
- In January 2026, overall economic activity expanded from the previous month in most categories, as reflected by the increase on both private consumption and private investment, particularly in the vehicle segment, driven by accelerated purchases ahead of the expiration of the EV 3.0 incentive scheme. The external demand had solid, led to a corresponding expansion in tourism activity and merchandised trade.
- In the first meeting of 2026, the Monetary Policy Committee (MPC) voted to cut the policy rate to 1.00%, to ensure that financial conditions remain supportive of economic recovery and to further alleviate debt burdens for SMEs and households, as well as to anchor medium-term inflation expectations amid heightened downside risks.
- The escalation of tensions between the US and Iran, pushing elevated and prolonged oil price, could lead to more downside risk on economic growth and inflationary pressure. In the short term, the impact on Thai industries is expected to arise mainly from the supply side. Disruptions to energy and intermediate goods supply chains—particularly crude oil and natural gas, petrochemical products, chemical and packaging products.
Financial Market
- In global financial markets, the recent Middle East tensions have triggered a broad risk-off sentiment. Equity markets sold off as investors moved away from risky assets. A similar pattern was seen in the bond market, with selling pressure pushing yields higher, driven by concerns over rising inflation and potential shifts in global central bank policies.
- The US dollar regained strength, supported by its status as a petrodollar currency and partly driven by the market’s revision of Fed rate cut expectations from roughly two cuts to less than one. Among regional currencies, the Thai baht has experienced the largest decline, reflecting its high dependence on energy. Looking ahead, amid ongoing Middle East tensions, the baht faces further depreciation risk in the coming months.
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