Thailand s economy teeters as political turmoil threatens recovery efforts

BANGKOK – Thailand’s economy is already on the ropes.

Consumption has remained tepid despite a government stimulus programme, few of its economic engines are firing, and uncertainty wrought by US President Donald Trump’s reciprocal tariffs means that the Thai economy could grow just over 1 per cent in 2025.

Now, South-east Asia’s second-largest economy faces a fresh challenge: a new round of political chaos that can bring down Prime Minister Paetongtarn Shinawatra or her ruling Pheu Thai party.

“We are currently in a period of economic downturn, with many issues affecting us,” Mr Visit Limlurcha, vice-chairman of the Thai Chamber of Commerce, told Reuters. “This could make things even more complicated.”

The most significant short-term concern is the passage of a 3.78 trillion baht (S$145 billion) budget for the 2026 fiscal year, which starts on Oct 1, that must pass through Parliament over the next few months.

That process could get stalled if Ms Paetongtarn, who is under siege for her handling of a festering border row with neighbouring Cambodia, dissolves Parliament and triggers fresh elections.

“If Parliament is dissolved before the budget is passed, the process will be delayed significantly,” said Mr Prakit Siriwattanaket, managing director of Merchant Partners Asset Management.

Thailand’s economy has lagged regional peers as it struggles under high household debt and borrowing costs, and sluggish demand from China, which is also a key tourism market.

It expanded 2.5 per cent in 2024, and growth could be further halved in 2025 due to US tariffs, Thai Finance Minister Pichai Chunhavajira said in May.

Thailand’s stock market has been the worst performing bourse in Asia, down 23.4 per cent. Industrial sentiment also hit its lowest in eight months in May, even as consumer confidence dropped to a 27-month low.

There is a clear need to press ahead