War Impact Exceeds Expectations; GDP Target Maintained at 1.2-1.6% as Energy Restructuring Investment Proposed

Pimjai Leeissaranukul, chairman of the Thai Industrial Confederation (FTI), chaired a meeting of the Joint Private Sector Committee bringing together three major business organizations alongside Pojanachai Aramwattananont of the Thai Chamber of Commerce and Vorakrit Charuwongpuk, secretary-general of the Thai Bankers Association.

Pimjai revealed that the Middle East conflict has dragged into its third month with no visible end in sight. The Strait of Hormuz remains unable to resume normal operations, while energy infrastructure damaged by recent attacks requires extended repair periods. Concerns about physical damage continue to keep energy prices elevated.

Economic impacts from supply shortages are already visible in the aviation sector, affecting tourists traveling on flights from the Middle East to Thailand. Given the unpredictable situation in the Middle East, risks to Thailand's economy may be higher than apparent. The committee therefore projects Thailand's 2025 GDP growth at 1.2-1.6%, with exports declining between -1.5% and -0.5%, and inflation rising to 2-3%, up from previous forecasts of 0.2-0.7%.

The economy faces continued challenges requiring monitoring of Middle East conflict impacts on raw material prices and business sector supply shortages, which could develop into new problems. Thailand should accelerate investment in energy restructuring, increase renewable energy production, reduce dependence on oil and gas imports, and expedite investments under the Reinvent Thailand initiative to support future economic growth.

The committee agreed to present proposals to the Prime Minister and Labor Minister for rapid consideration and implementation. Thailand's first quarter 2025 economy grew 2.8%, though gains concentrated in specific sectors, driven by strong private investment, accelerated public spending, and robust export growth in digital technology and AI products—tech exports expanded over 45% with 12 consecutive quarters of growth. However, exports remain concentrated and haven't broadly benefited manufacturing sectors.

The Office of the National Economic and Social Development Council, Commerce Ministry, and the committee's estimates project Brent crude oil averaging $90.3 per barrel this year, with domestic fuel prices floating, inflation's lower bound at 2%, and an expected 50% reduction in oil excise tax from current rates.

Pimjai further called on the government to urgently address severe labor shortages in labor-intensive industries, balancing security, economic, and social dimensions. The committee views the government should accelerate both short and medium-term labor measures, with foreign worker permit renewals for current residents and workers constituting essential immediate action to prevent workforce loss from the system.