Bank of Thailand says April economy softened as Middle East conflict hit tourism and lifted inflation

The Bank of Thailand reported that Thailand’s economy softened in April from the previous month, with the Middle East conflict weighing on tourism, consumption and investment. Foreign tourist arrivals and tourism receipts continued to decline, especially from short-haul markets, as several airlines reduced flight services amid higher fuel costs, while arrivals from the Middle East and Europe remained low. Private consumption fell after earlier front-loaded purchases, with lower spending on consumer goods and fuel, and private investment also declined after accelerating in the previous month. The slowdown fed through to service activity in trade, hotels and restaurants. By contrast, merchandise exports excluding gold increased across several categories, particularly technology products and automotive exports, though exports to the Middle East stayed contracted. Manufacturing production was broadly stable as gains in automotive, rubber and plastics offset weaker sugar output, and government expenditure expanded on higher current and capital spending by the central government. On the stability side, headline inflation rose significantly from the previous month, driven mainly by higher energy prices linked to the Middle East conflict, while raw food prices also increased because of lower agricultural output. Core inflation increased as higher energy costs passed through into prepared food prices and public transport fares. The current account posted a large deficit, mainly due to a trade deficit after import values accelerated, while overall labor market conditions improved.