WHAT YOU NEED TO KNOW
  • The recent government appointment is expected to be short-lived, allowing for swift economic stimulus measures during a period of relative stability. However, political uncertainty will likely intensify as the next election approaches in the first half of 2026.
  • The 2026 GDP growth projection was cut from 1.7 percent to 1.6 percent due to the 19 percent U.S. tariff and baht appreciation, which reduced Thailand’s export competitiveness relative to neighboring countries. In response, the government has rolled out various stimulus packages, expected to boost GDP growth by 0.2-0.3 percent in the fourth quarter.
  • Thailand sought to attract foreign investment in “S-curve industries” (emerging sectors with high growth potential) and enhance the investment climate through sector-specific policies and targeted incentive measures. Infrastructure expansion and public investment were also advanced to support GDP growth. On reciprocal tariffs, Thailand removed duties on nearly all U.S. goods to ease trade relations. Nevertheless, the 19 percent U.S. tariff remains in place.
ON THE HORIZON
  • According to the Bhumjaithai-People’s Party memorandum of agreement, the lower house is expected to be dissolved in January 2026, if not earlier due to a potential no-confidence motion, with a general election likely between March and April. This will mark the first time Thai voters cast four ballots simultaneously: for the general election, a constitutional referendum and votes concerning Thai-Cambodian land and maritime boundaries.
  • Household and tourism spending will be key drivers of economic growth in the first half of 2026. Exports could face challenges from a slowing global economy and intensified trade tensions, which will require the government to balance fiscal discipline with measures to support demand. The Bank of Thailand may reduce the policy rate to stimulate the economy if GDP growth remains below expectations.
  • Thailand’s investment climate may come under pressure from domestic political and global economic uncertainties. Infrastructure development initiatives will continue and are expected to gradually contribute to growth. Targeted measures to promote investment will be prioritized.

Thailand Market Overview and Forecast


Political Climate
Government Maintains Fragile Stability Ahead of the House Dissolution

The minority government under Prime Minister Anutin Charnvirakul is struggling to maintain cohesion amid intensifying scrutiny over a flood crisis, with political implications and ongoing geopolitical risks. The administration faces criticism following investigations into illegal land encroachment, cross-border cybercrime operations linked to Thai political figures, tensions along the Thai-Cambodian border and negotiations on the Thai-U.S. trade agreement.

Anutin plans to dissolve the House of Representatives by the end of January 2026 — a timeline set under the Bhumjaithai-People’s Party memorandum of agreement, though it could occur earlier if a no-confidence motion is filed. The process will pave the way for the next general election, expected between March and April 2026. The upcoming poll will be the first time Thais vote on four different ballots: the constitutional referendum and the votes on memorandums of understanding 43 and 44 — related to Thai-Cambodian land boundaries and maritime claims — are expected to take place concurrently. The new administration will likely assume office by mid-2026 if the post-election process proceeds without delay.

Pre-Election Environment Spurs Realignment Across Political Parties

Political parties are recalibrating alliances to strengthen their electoral standing. Heading into the first half of 2026, Bhumjaithai continues to consolidate its provincial base, leveraging its conservative image and incumbency advantage to appeal to rural and moderate voters. Its strategic positioning and coalition-building flexibility will strengthen its prospects as a pivotal coalition anchor in the next government. Meanwhile, Pheu Thai is working to rebuild its momentum, relying on its extensive local networks and enduring brand recognition. The People’s Party maintains strong urban and youth support but faces credibility challenges from its earlier coalition alignment with Bhumjaithai. Traditional conservative parties — Khla Tham, the Democrat Party, the Palang Pracharath Party and United Thai Nation — will remain fragmented, with the latter two possibly losing traction amid leadership divisions.

Political Transition Creates Short-Term Policy Uncertainty

Uncertainty about the next government will likely slow legislative and regulatory activity through mid-2026, with expected administrative delays and possible shifting policy priorities in key sectors sensitive to coalition negotiations. Nevertheless, stability is anticipated after the government forms.

Macroeconomic Climate
Economy Poised for Gradual Growth on Path to Stable Recovery

The economy is at an inflection point before a potential rebound, with the government prioritizing short-term policies to restore confidence and support recovery. GDP growth for 2026 was revised down to 1.6 percent from 1.7 percent, due to the anticipated impact of U.S. tariffs. The sharp appreciation of the baht since early 2025 has weakened Thailand’s competitiveness compared to neighboring countries facing the same U.S. tariff rate. Headline inflation is projected to reach 0.5 percent in 2026. If the economy falters in the fourth quarter of 2025, the Bank of Thailand may consider reducing the policy rate from the current 1.5 percent to boost recovery and align inflation within its 1-3 percent target.

At the sectoral level, tourism is poised for a continued recovery. The national mourning period is expected to temporarily disrupt tourism activities, with the Bank of Thailand projecting 35 million foreign arrivals in 2026. The government’s economic stimulus measures are expected to provide an additional boost to the overall economy in the fourth quarter, contributing roughly 0.2-0.3 percent to quarterly growth and potentially carrying over into the first quarter of 2026. Despite these efforts, small and medium-sized enterprises will continue to struggle with high debt burdens, limited access to credit and rising competition from lower-cost imported goods. However, the durability of these fiscal measures remains uncertain, because the current administration’s short policy horizon limits its ability to sustain medium- to long-term economic support.

Thailand’s medium-term economic outlook will depend on how effectively policymakers balance fiscal discipline with measures to sustain domestic demand. Household spending and tourism receipts are expected to remain key pillars of growth, while exports will continue to face headwinds from a slowing global economy and ongoing trade tensions. The government’s capacity to maintain fiscal support is constrained by limited budgetary room and rising public debt, but improving confidence in the private and service sectors could act as a stabilizer. Although the path to stronger growth may be gradual, the combination of resilient domestic consumption, steady tourism inflows and cautious monetary easing signals that Thailand’s economy is slowly regaining its footing toward a more stable recovery.

Investment Environment
Thailand Boosts Investment Incentives in Selected Sectors Amid Uncertainties

The investment outlook for the forecast period will be clouded by domestic political uncertainty and external pressures, including U.S. tariffs, intensifying U.S.-China trade tensions and the unresolved Thai-Cambodian border dispute. Nevertheless, the Board of Investment expects investment inflows to remain resilient, supported by targeted investment promotion measures. “S-curve industries,” including bio-circular-green sectors, advanced manufacturing, digital technology, semiconductors, electric vehicles, data centers and cloud services, remain investment priorities.

The Board of Investment aims to enhance the investment climate with targeted incentive measures like qualified refundable tax credits to cushion the impact of the global minimum tax and Thailand Fast Pass to accelerate approvals for strategic investment projects. The government will introduce policies like the Southern Economic Corridor Act and a direct power purchase agreement pilot project to attract investment and lower energy costs for data center operators. Workforce development remains the government’s key priority to build talent for the digital and innovation-led markets.

The Cabinet approved a roughly $49 billion investment framework for state enterprises in fiscal year 2026, aiming to raise Thailand’s GDP growth by about 0.3 percent. The government will also continue to advance major infrastructure projects such as the development of U-Tapao Airport, Eastern Aviation City and airport expansions in Bangkok, Chiang Mai and Phuket. The airport high-speed rail remains stalled, while the Belt and Road Initiative-backed Bangkok-Nakhon Ratchasima high-speed rail is set to open in 2028, extending to Nong Khai by 2031.

Although U.S. tariffs may dampen investment sentiment, the government will continue negotiating the U.S.-Thailand trade agreement to sustain Thailand’s competitiveness as a manufacturing and trade hub.

We will continue to keep you updated on developments in Thailand as they occur. If you have any comments or questions, please contact BGA Thailand Managing Director Teerasak “Art” Siripant at tsiripant@bowergroupasia.com.

Best regards,

BGA Thailand Team

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Managing Director

Art is an intuitive leader with a strong set of relationships with Thailand’s government, business, media and civil society leaders. His network spans a diverse set of stakeholders, from farmers in rural Thailand to the top echelons of Thailand’s political leadership. Prior to joining BGA, Art spent a decade serving as the chief political advisor to the Australian ambassador to Thailand. In this role, he had a front row seat to the most significant political and economic developments in Thailand. Earlier, he served as an army intelligence officer in the Royal Thai Armed Forces. Art has played a central role ... Read More