Although a ceasefire agreement reached on the morning of April 8 (Thailand time) has raised hopes, it has not eliminated broader uncertainty in global markets.
Against this backdrop, regional economic growth is projected to slow to 4.2% in 2026, down from 5.0% in 2025. The slowdown reflects compounded pressures from the energy crisis linked to Middle East tensions, alongside heightened trade protectionism, global policy uncertainty and domestic structural challenges.
To mitigate the impact, the World Bank recommends that governments strike a careful balance between short-term relief and long-term reform, supporting vulnerable groups and small businesses while pushing ahead with structural changes to drive future growth.
Lessons from Thailand’s response during the Covid-19 pandemic highlight the importance of strong digital infrastructure, Mattoo said. Countries with robust digital registries, such as Thailand, were able to deliver targeted assistance more efficiently.
In contrast, untargeted support measures tend to strain public finances, increase debt burdens and push up interest rates, ultimately undermining long-term economic growth.
On monetary policy, the region is now facing what the World Bank describes as a “double menace”, rising inflation combined with slowing growth.
If inflationary pressures are driven mainly by temporary supply-side shocks, central banks may be able to hold policy steady. However, if inflation expectations become entrenched and start feeding into wages and prices, policymakers could face a difficult trade-off between tightening policy to curb inflation or maintaining accommodative conditions to support growth.
The report also found that countries with clear fiscal rules, credible inflation-targeting frameworks and strong institutional structures are better positioned to absorb economic shocks and limit negative impacts.
Mattoo added that crises can serve as a catalyst for long-overdue structural reforms, particularly in sectors that remain heavily protected, such as services.
He pointed to Vietnam as an example of a country that has begun liberalising its service sector, helping to boost productivity across both services and manufacturing.
Sustainable recovery, he suggested, does not always require large-scale infrastructure investment. Removing policy barriers can be an equally powerful starting point for reform.
For Thailand, the World Bank highlighted persistent structural challenges, noting that the economy has been growing at a modest pace of just 1–2% annually in recent years.
This sluggish performance is largely attributed to a lack of meaningful structural reform, including restrictions on foreign investment in the financial sector, seen as a key obstacle to broader industrial development.
In its April 2026 EAP Economic Update, the World Bank revised down Thailand’s GDP growth forecast to 1.3%, from 1.8% projected in October 2025.
This places Thailand as the slowest-growing economy among the Southeast Asian countries covered in the report.