BANGKOK – Thailand has entered what economists call “technical deflation”, according to analysts at the Centre for Economic and Business Forecasting at the University of the Thai Chamber of Commerce. Headline inflation stayed below zero for nine straight months up to December 2025, passing the six-month mark often used to label this type of price trend.
The data points to a long run of falling consumer prices. It also marks the first full year of deflation in five years, with the headline Consumer Price Index (CPI) down 0.14% across 2025.
Technical deflation describes a stretch where overall prices drop over time. It is usually tracked through negative headline inflation for more than six months. In Thailand, that run began in April 2025 and did not break. December recorded a 0.28% year-on-year fall.
Assoc. Prof. Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce and chair of the Centre for Economic and Business Forecasting, said the length of the decline fits the common definition of technical deflation. He added that economists often use a period longer than six months as the guide.
This is not the same as a deflationary crisis. A crisis tends to bring wider price cuts, weaker spending, delayed buying, lower wages, and a downward loop that is hard to stop.
Why Prices Fell: Fuel Drops and Weak Farm Prices
Economists say the main pressure comes from the supply side, not from a sudden slump in demand. Lower costs have pulled prices down, led by a sharp fall in global fuel prices and farm goods that have stayed cheap. Energy prices affect transport, factories, and electricity bills, so cheaper oil has had a clear knock-on effect. State support for electricity and fuel has added to the drop.
Farm prices have also stayed low. Supply has been strong, while demand has cooled in key export markets. Fresh food, which takes up a large share of the CPI basket, has remained soft and has dragged the headline number lower.
The Trade Policy and Strategy Office (TPSO) at the Ministry of Commerce said December’s 0.28% fall in headline inflation was driven mainly by cheaper energy in line with global trends. Over the year, those same factors helped push the CPI down 0.14%.
Even with negative headline inflation, economists say Thailand is not in a dangerous deflationary cycle. Core inflation, which removes fast-moving items like fresh food and energy, stayed positive through the period. In December 2025, core CPI rose 0.59% year-on-year. That suggests the underlying demand has not fallen away.
Why It is Not a Crisis: Core Inflation Stays Up, GDP Keeps Growing
Thailand’s economy also kept growing. The Bank of Thailand (BOT) puts 2025 GDP growth at about 2.2%, helped by the return of tourism, electronics exports, and state stimulus. Household spending held up in a modest way, supported by stronger visitor numbers, though high household debt continues to limit how far consumers can go.
The BOT has said the fall in headline inflation does not show a broad slide in prices across the economy. Inflation expectations for the medium term remain within the 1% to 3% target band, and current deflation risks are seen as low.
Thanavath Phonvichai expects headline inflation to turn positive again in 2026, at around 0.5%. He links this to a possible lift in farm prices as some farmers cut planting after the current price lows.
Thailand’s Bigger Concern: Weak Growth and a Risk of Stalling
Economists say technical deflation is not the main worry. The bigger issue is Thailand’s long spell of slow growth.
Growth has sat around the low-2% range for several years. That is well below levels seen before the pandemic and behind many countries in the region. Forecasts for 2026 suggest it could slow again, with estimates of 1.5% to 1.8%. That would put it among the weakest in decades outside major crisis years.
Several pressures are building at once. US trade tariffs could weigh on exports, while a strong baht can make Thai goods less competitive. Heavy household debt continues to hold back spending. Manufacturing faces structural strains, and global tensions add uncertainty.
The BOT has pointed to weaker competitiveness, with exports expected to flatline or fall in 2026. Private investment remains slow, and delays in public spending add to the drag.
Economists say Thailand could slip into long-term stagnation if slow growth continues without firm reforms. Common suggestions include lifting productivity, drawing in foreign investment in high-tech industries, and tackling debt burdens. Some warn of a “Japanification” path, where low growth, low inflation, and an ageing population feed low confidence and weaker investment.
One analyst warned that short-term stimulus can help, but heavy reliance on it may strain public finances and add problems such as rising bad debts. Others want faster action on infrastructure, education, and the digital economy to build stronger growth.
What Comes Next: Forecasts and Policy Signals
The TPSO expects headline inflation in 2026 to sit between 0.0% and 1.0%, with 0.5% as the midpoint. The BOT has already cut rates to historic lows and has signalled it could ease more if conditions worsen.
In northern areas such as Chiang Rai, where farming supports many households, cheap produce has helped shoppers in the short term. At the same time, it has cut into farm incomes. Local markets report lower prices for rice, vegetables, and fruit, while some sellers worry that weak growth could keep demand soft.
Thailand now faces a balancing act. Policymakers need to support demand without creating new imbalances. For now, technical deflation looks more like a sign of deeper issues, not the main problem, and the cost of ignoring weak growth could rise over time.
