Thailand's inflation slowed to 2.79% in May, with ongoing pressure from energy costs; economy and tourism dragged down by Middle East conflict.

(1) Despite the surge in global energy costs due to the Middle East conflict, Thailand’s inflation eased in May. Government data show that the Consumer Price Index (CPI) rose by 2.79% year-on-year last month, lower than April’s 2.89% and below market expectations of 3.23%. Core inflation increased from 0.83% to 0.92%. In recent months, Thailand's inflation has climbed steadily, gradually emerging from a year-long deflation.(2) Due to Thailand’s heavy reliance on crude oil imports from the Middle East, rising energy prices may be transmitted to transportation, production, and business costs. The Bank of Thailand stated in its latest report that economic activity in April slowed compared to the previous month, mainly because of the Middle East conflict; the number of inbound foreign tourists and tourism revenue continued to decline, partly due to higher fuel costs leading airlines to reduce flights, and the number of tourists from the Middle East and Europe remained subdued.(3) Economists expect that energy prices will remain the main driver of inflation in the short term. DBS Group pointed out that the increase in domestic fuel costs in May drove up inflation, and businesses may pass part of the cost on to consumers. Last month, the Thai government’s economic planning agency raised the 2026 inflation forecast to 2.0%-3.0%, citing higher energy and production costs tied to the conflict.