K-Research foresees stagflation risk in H2

Companies begin restocking materials Thailand is expected to enter a state of stagflation late in the second quarter and the beginning of the third quarter of this year as businesses begin material restocking while oil prices remain high amid ongoing conflicts in the Middle East, according to Kasikorn Research Centre (K-Research). Nuttaporn Triratanasirikul, deputy managing director of K-Research, sees a low probability that the US and Iran will reach an agreement to end their conflict in the Middle East in the near term, even though there are hopes of an extended ceasefire and a second round of negotiations. "The terms proposed by both sides make it difficult for them to eventually reach an agreement. The Strait of Hormuz has become a focal point where oil and raw materials passing through this channel become scarce and expensive for a certain period of time," she told the Bangkok Post. K-Research anticipates oil prices will average US$90 per barrel for all of 2026, up significantly from around $60-70 before the Gulf war erupted. Under the current scenario, oil could trade above $100 per barrel for as long as three months, according to Ms Nuttaporn. Businesses, meanwhile, have started restocking materials during April and May when supplies are tight. "That prompts us to believe goods prices would be hiked, driving inflation higher in the later stage. High oil prices would also pressure economic growth, pushing Thailand to enter stagflation late in the second quarter or early third quarter," she pointed out. The think-tank now anticipates Thai inflation will hit 3%, higher than its previous forecast of the high 2% range. GDP growth, on the contrary, has been revised down to as low as 1.2%, compared to 1.9% in the original estimates. "The expected higher inflation reflects our view that the government's petrol price subsidy ended earlier than our forecast, given limited fiscal capacity. Consequently, they can only extend support to vulnerable groups," Ms Nuttaporn noted. Oil prices, meanwhile, reversed earlier declines on scepticism that peace talks between the US and Iran will reach a deal to end the war that has disrupted oil output from the key Middle Eastern producing region. West Texas Intermediate crude soared 0.64% to $91.87 a barrel in early afternoon trade, while Brent crude edged up 0.11% to $95.03. In a related development, the International Monetary Fund earlier this week slashed its global 2026 GDP growth forecast, citing rising oil prices and associated inflation risks. In its World Economic Outlook, the fund sees the global economy growing 3.1% this year, down from the 3.3% projected earlier.