Thailand Holds Rate at 1% as AI Exports Lift Growth Forecast but Households Struggle

Stronger exports bring a better forecast, not a rate change

The Bank of Thailand kept its policy interest rate at 1.00% on October 28, 2026, while raising its economic growth forecasts as demand linked to artificial intelligence strengthened exports and investment. The decision leaves borrowing conditions supportive of an economy where technology businesses are gaining ground but many households and small companies remain under pressure.

The Monetary Policy Committee voted unanimously among the six members attending, with one member absent. This was the fourth consecutive meeting without a rate change, keeping the one-day repurchase rate at its lowest level since September 2022. The rate guides short term borrowing costs in the financial system and influences the interest banks charge customers.

The central bank now expects gross domestic product, the value of goods and services produced in Thailand, to grow 2.4% in 2026 and 2.1% in 2027. Its June forecasts were 2.3% and 1.8%, respectively. Yet the bank said the economy was still growing below its potential, with the benefits of technology investment concentrated in particular businesses and workers.

September inflation of 2.82% remained inside the bank's target range of 1% to 3%, giving policymakers room to keep supporting recovery despite higher energy costs. The next interest rate meeting is scheduled for December 23.

The immediate decision was widely expected. All economists in three separate surveys, involving 26, 23 and 14 respondents, anticipated a hold. The more consequential issue is how long Thailand can keep rates low while exports accelerate, household spending stays weak and oil prices threaten another rise in living costs.

How Thailand reached its fourth consecutive hold

The central bank cut rates six times between October 2024 and February 2026, reducing them by a combined 150 basis points. A basis point is one hundredth of a percentage point, so those cuts lowered the rate by 1.5 percentage points, from 2.5% to 1.0%.

Those reductions were intended to support Southeast Asia's second largest economy through weak domestic demand and high household debt. Policymakers have since kept the rate steady while assessing how much support is reaching businesses and families.

• October 2024 to February 2026: Six cuts brought the policy rate down to 1.00%.
• August 26, 2026: The committee maintained the rate at 1.00%.
• October 12, 2026: Governor Vitai Ratanakorn expressed confidence in growth of 2.3% for the year, supported by exports and foreign direct investment.
• October 28, 2026: The committee held the rate again and raised its growth forecasts.
• December 23, 2026: The committee is scheduled to meet for its next rate decision.

Why a brighter outlook still leaves the bank cautious

Thailand's economy expanded 1.9% from a year earlier in the second quarter, slowing from 2.8% in the first quarter. That decline of 0.9 percentage points helps explain why policymakers remain cautious despite the stronger export outlook.

The new forecast of 2.4% growth for 2026 would match the expansion recorded in 2025. The larger forecast upgrade concerns 2027, where the bank raised its estimate by 0.3 percentage points, compared with a 0.1 percentage point increase for 2026.

The International Monetary Fund also raised its 2026 growth forecast, from 1.9% to 2.1%, and expects 2.1% growth in 2027. Its forecast for this year remains below the Thai central bank's estimate, although both institutions expect the same growth rate next year.

Growth below potential means the economy is expanding more slowly than policymakers judge it could sustain. In Thailand's case, strong activity in selected export industries is occurring alongside weak purchasing power, fragile employment conditions and difficulties facing smaller businesses.

AI demand drives a sharp export upgrade

The Bank of Thailand now forecasts export growth of 22% in 2026, up from 14% in June and an estimate of 17% to 18% earlier in October. For 2027, it expects exports to rise 15%, compared with its June forecast of 4.6%.

September exports increased 24% from a year earlier as demand for electronics benefited from the global artificial intelligence investment cycle. Spending on the equipment and services used for AI is supporting orders and private investment connected to Thailand's technology industries.

Imports rose even faster, increasing 50.4% in September, driven by fuel and capital goods. Capital goods are machinery and equipment that businesses use to produce other goods or services. Their purchase can support future production, while imported fuel meets immediate energy needs.

The import surge also helps explain why a large export upgrade produces a much smaller change in the GDP forecast. GDP accounting subtracts imports when measuring domestic production because goods made abroad are already included in spending figures. Part of Thailand's stronger spending therefore flows to overseas suppliers.

The central bank expects the current account, a broad measure of trade and other income flows with the rest of the world, to be approximately balanced in 2026. It projects a surplus of $18 billion in 2027, up from an earlier estimate of $8 billion.

Household spending and tourism remain weaker links

High household debt continues to restrict private consumption. Families making substantial debt repayments have less money available for other purchases, while fragile labour conditions and weak purchasing power add pressure. The central bank singled out households with low incomes as especially exposed to living costs.

Technology gains remain concentrated among businesses and workers connected to the relevant industrial and service sectors. For families outside those activities, better export figures may bring little immediate relief to household budgets.

Tourism forecasts have weakened even as export forecasts have improved. The bank expects 32 million foreign arrivals in 2026 and 34.5 million in 2027, cutting each estimate by one million. It cited higher oil prices as a factor weighing on arrivals, although the new forecasts still show an increase of 2.5 million visitors between the two years.

Inflation is inside target, with oil and weather risks ahead

September's annual headline inflation rate of 2.82% was near the upper end of the 1% to 3% target range. Headline inflation measures changes in the broad basket of goods and services households buy, including food and energy.

The central bank nevertheless lowered its forecast for average headline inflation in 2026 to 2.1%, from 2.2% earlier in October and 2.8% in June. For 2027, it reduced the forecast to 1.3% from 1.4%. A monthly annual reading and a forecast for the year's average measure different periods, which explains how September inflation can be higher than the annual projection.

Core inflation, which excludes volatile food and energy prices, is forecast at 1.2% in 2026 and 1.3% in 2027. Those estimates are down from June projections of 1.5% and 1.4%. Core inflation helps policymakers track price pressures beyond the most changeable household expenses.

The committee expects higher energy prices and El Niño to lift inflation temporarily during the remainder of 2026 and into early 2027. El Niño is a climate pattern that can disrupt rainfall and agricultural production. The Middle East conflict, limits on measures to cushion energy prices and businesses passing higher costs to customers could push inflation above the forecasts.

The bank expects inflation to ease later as domestic demand remains weak and comparisons shift against an earlier period of higher prices. Officials are watching whether energy costs spread into core inflation and change expectations about future price increases.

Small businesses face a credit squeeze despite low rates

Total lending is growing, but the increase is mainly going to large businesses. Lending to small and medium sized enterprises, known as SMEs, continues to contract across almost all sectors, while household lending is expanding slowly.

Large companies are borrowing mainly for working capital, the money needed for daily operations, liquidity and higher costs. Some lending is also financing new investment. Banks remain cautious about borrowers they consider more likely to struggle with repayment.

The result is an uneven flow of financial support: a low policy rate helps keep borrowing costs stable, but smaller businesses still face difficulty securing loans. The committee said loan quality was stable while identifying the repayment capacity of SMEs and vulnerable households as an area requiring close monitoring.

Assistant Governor Don Nakornthab said broad monetary policy was reaching limits in addressing uneven recovery and pointed to targeted financial measures. The SME Credit Boost programme used its full funding allocation within 10 months, illustrating demand for support directed specifically at smaller firms.

Officials also estimated that recent floods would reduce real GDP by less than 0.1% after allowing for repair and rebuilding activity. That assessment was already included in the economic forecast.

The baht's quiet reaction follows a weaker year

The baht was little changed immediately after the rate announcement, following a decision markets had expected. Over a longer period, however, the currency had weakened by about 7% against the US dollar since the start of 2026 and about 2% since the previous committee meeting.

The central bank attributed that depreciation partly to expectations of tighter US monetary policy and higher oil prices. A weaker baht increases the local currency cost of purchases priced in dollars, adding pressure when imported energy is already expensive.

Thai government bond yields rose moderately in line with global financial markets. Borrowing costs through bank loans, the private sector's main funding channel, remained stable alongside the unchanged policy rate. Businesses therefore faced different conditions depending on whether they borrowed from banks or raised money through bond markets.

Regional policy decisions also varied. The Philippines raised its rate by 50 basis points on October 22 to combat inflation, while Indonesia and Singapore recently kept their policy settings unchanged. Thailand's weaker domestic demand and inflation outlook have allowed its central bank to retain support for growth.

December is next, but the longer rate path is unsettled

Kasikorn Research expects another hold at the December meeting, according to its October policy assessment. Most economists surveyed before the October decision expected the rate to remain at 1% through the end of 2027.

Other forecasts point in opposite directions. Capital Economics expects one further cut of 25 basis points in 2027, while JPMorgan Chase, OCBC and Bank of America have highlighted a growing likelihood of tightening next year.

Don, the assistant governor and secretary of the Monetary Policy Committee, explained at the briefing why the bank was considering the longer effects of low rates:

The monetary committee sees that low rates will have a long-term effect. If the economy is strong enough, rates can gradually rise to maintain policy space,

Policy space means room to reduce interest rates when a future shock hits. Gradually raising rates during a stronger recovery could restore some of that room. Don also said prolonged low rates could encourage investors to underestimate risk or seek higher returns through riskier investments, while describing those concerns as matters for monitoring rather than current problems requiring action.

Deputy Governor Piti Disyatat said earlier in October that policy would remain supportive until the economy was ready for rates to return towards more normal levels. The bank has set no date for a change. Its December assessment will weigh export momentum against household spending, credit access and the risk that oil and weather pressures spread through prices.

Key Points

• The Bank of Thailand held its policy rate at 1.00% on October 28, 2026, for a fourth consecutive meeting.
• Six attending committee members voted unanimously; one member was absent.
• Growth forecasts rose to 2.4% for 2026 and 2.1% for 2027, supported by exports and technology investment.
• Export growth is forecast at 22% in 2026 and 15% in 2027, while tourism forecasts were reduced.
• High household debt, weak purchasing power and shrinking SME credit continue to constrain recovery.
• Average headline inflation is forecast at 2.1% in 2026 and 1.3% in 2027, with oil prices and El Niño posing risks.
• The next rate meeting is December 23; Kasikorn Research expects another hold.