SCB EIC expects Thailand’s economy to grow by 1.5% in 2026
Thailand’s economy in 2026 is expected to grow by only 1.5%, the lowest in three decades (excluding crisis years), down from 2% in 2025. Main pressures come from external factors: global economic slowdown, trade wars, and intensifying foreign competition, as well asstructural constraints at home, including household and business fragilities, weak purchasing power, and fiscal constraint amid political uncertainty. Urgent structural reforms are essential to create new growth engines, raise economic potential, and build resilience against rising volatility.
• 7 questions shaping Thailand’s economy in 2026
1. How will trade wars and external competition affect Thailand?Exports risk contracting by 1.5% due to U.S. tariffs, tougher global competition, and global economic slowdown. Tourism will grow about 4%, but still far below pre-COVID levels, challenged by intensifying tourism war in Asia, a stronger baht, and safety concernsamid escalating border tensions.
2. What risks will weigh on private consumption? Wage growth remains slow amid fragile labor markets and weak consumer confidence. Household debt-to-income ratios remain high, and dectservice repayment risks are spreading to middle- and high-income groups. Households are likely to cut spending while debt deleveraging continues.
3. Can private investment expand amid mounting uncertainty?Private investment is expected to grow modestly, mainly supported by foreign investment flowing into new industries supported by BOI incentives. However, these investments will have a high import content, limiting their short-term domestic benefits and potentially increasing the risk of U.S. transshipment tariff in the future. Meanwhile, Thai businesses’ investment in machinery and construction will keep contracting due to weak demand and low capacity utilization.
4. Will tight financial conditions improve? In 2025, even though the Monetary Policy Committee cut the policy rate, financial conditions tightened significantly as household and SME lending contracted and the baht strengthened sharply. For 2026, EIC expects the policy rate to be reduced to 1% in the first half of the year to support the economy by lowering financing costs, easing pressure on the baht, and lifting inflation, which is likely to stay below target. However, access to credit for households and SMEs will remain challenging because their financial positions are still fragile amid heightened economic uncertainty, prompting banks to remain cautious in lending. Government measures will therefore be crucial, such as debt restructuring support for households, soft loans, and credit guarantees for SMEs. The success of these financial measures must go hand-in-hand with policies to boost household income and strengthen SME competitiveness.
5. How will political uncertainty affect fiscal policy and the economy? An early dissolution of parliament, ahead of the original timeline, would likely result in lower-than-usual disbursement of investment expenditure in FY2026 but could help reduce delays in the enactment of the FY2027 Budget Act. Nevertheless, political uncertainty remains elevated, while medium-term government spending will face increasing constraints amid pressure to implement fiscal reforms aimed at reducing the budget deficit and containing public debt. These will be key priorities for the new government in restoring confidence in Thailand’s credit rating and ensuring long-term fiscal sustainability.
6. Structural reform is the way forward, but how sustainable will it be? The Thai economy stands at a critical turning point, facing mounting pressures on multiple fronts. Structural reform is an unavoidable solution for the country. The government must build on existing initiatives and accelerate concrete economic reform policiesin earnest. With a focus on long-term policies to enhance the country’s competitiveness, the strategy emphasizes upgrading business support measures and restructuring the economy in partnership with the private sector, for example, removing investment barriers and promoting high-potential industries through a reform platform in collaboration with businesses socalled ‘Reinvent Thailand’.
7. Which businesses can move forward, and how should they adapt to survive? Thai businesses will face five key challenges: global supply chain volatility, fragile household purchasing power, policy uncertainty, intense competition both domestically and internationally, and pressures from fast-moving megatrends. Overall,business activity in 2026 is expected to remain subdued. However, subsegments that can adapt and manage these risks effectively will have opportunities to grow and leverage. Examples include businesses that adopt new technologies to create added value, those that respond to changing consumer behavior and sustainability trends, and those that tap into markets with strong growth potential.
• The global economy is expected to slow next year as the impact of U.S. tariff becomes more pronounced.
o SCB EIC expects global economic growth to slow to 2.5% in 2026 (from 2.7% this year). The key drag will come from U.S. import tariff measures, which will weigh on global trade following a period of front-loading. Nevertheless, the global economy will continue to gain momentum from AI-related investment, particularly in the U.S., as well as from accommodative monetary and fiscal policies, despite increasingly policy constraints.
o The Fed’s policy rate is expected to decline further next year, but additional cuts may be limited by inflation concerns . The Fed is likely to cut rates by another 50 bps, while the ECB is expected to keep rate low at 2%. In contrast, the BOJ is projected togradually raise rates to around 1% by mid-2026.
Why might Thailand’s economy in 2026 record its lowest growth in three decades (excluding crisis periods)? SCB EIC explores the answer through seven key questions.
SCB EIC projects Thailand’s economy to expand by only 1.5% in 2026, down from 2% in 2025, the lowest growth in three decades (excluding crisis years). This outlook reflects mounting external pressures, including the escalating trade war and intensifying foreign competition in both goods and tourism,
as well as rising domestic vulnerabilities among households, businesses, and fiscal policy constraint.
These challenges, compounded by long-standing structural issues, underscore the urgent need for Thailand to accelerate a serious overhaul of its economic model.
Seven key questions shaping the direction of Thailand’s economy in 2026
1. How will the trade war and external competition affect Thailand?
Although Thai exports are expected to record strong growth in 2025, they are likely to contract in 2026 due to several key factors: (1) signs of a global economic slowdown amid elevated trade uncertainty and the increasingly evident impact of U.S. tariff measures; (2) the fading effect of front-loading, following the implementation of higher U.S. import tariffs since August this year; (3) rising risks of additional U.S. tariffs, particularly on electronics and transshipped products; and
(4) intensifying competition from China after the U.S. and China reached a one-year trade agreement to temporarily reduce retaliatory tariffs, enabling Chinese products to regain market share in the U.S. market. In addition, both Thai exports and imports remain exposed to potential delays in the outcome of trade negotiations with the U.S., amid escalating border tensions with Cambodia and heightened political uncertainty following the early dissolution of parliament.
In 2026, foreign tourist arrivals to Thailand are expected to increase to around 34.1 million, up from 2025. However, the recovery of Chinese tourists will likely remain gradual. Intensifying tourism competition across Asia, the so-called “tourism war”, together with the prolonged Thai-Cambodian border conflict, will pose significant challenges to the continued recovery of Thailand’s tourism sector.
2. What risks will weigh on private consumption?
Private consumption is expected to continue slowing in 2026 due to several factors. Household income recovery remains sluggish amid a more fragile labour market, as reflected in declining employment and working hours. According to the SCB EIC Consumer Survey 2025, households continue to experience income growth that lags behind rising expenses, particularly among low-income groups. Meanwhile, debt burdens remain elevated, and repayment risks have begun to spread to higher-income segments. In addition, non-performing loans (NPLs) remain persistently high, prompting households to reduce spending in order to deleveragedebt, a trend that will continue to weigh on consumption going forward.
3. Can private investment expand amid mounting uncertainty ?
Private investment is expected to expand in 2026, though growth will remain modest. Key support will come from the rising value of investment promotion applications approved by the Board of Investment (BOI) and the emergence of new investment drivers in high-potential industries such as data centres, electrical appliances and electronics, and the automotive sector — particularly those serving the ASEAN market. These developments will help Thailand maintain its position as part of the global manufacturing base. However, the positive spillovers from investment to the overall economy are likely to be limited, as Thailand’s import content — particularly from China — has risen significantly compared with the past. This will constrain the benefits to domestic production while increasing the risk of U.S. transshipment tariffs. At the same time, Thai businesses continue to face declining profitability and rising debt burdens, posing key constraints to overall investment momentum.
4. Will tight financial conditions improve ?
In 2025, even though the Monetary Policy Committee cut the policy rate, financial conditions tightened significantly as household and SME lending contracted and the baht appreciated sharply. For 2026, EIC expects the policy rate to be lowered to 1.0% to support Thailand’s subdued growth outlook by reducing financing costs, easing pressure on the baht, and lifting headline inflation—which is likely to remain below target—thereby reducing the risk of debt deflation that could weigh on domestic spending. However, rate cuts alone may not significantly improve credit access for households and SMEs, as their financial positions remain fragile amid heightened economic uncertainty, prompting banks to stay cautious in lending. SCB EIC recent surveys show that insufficient income relative to expenses is a key reason why debt-servicing burdens remain high, especially among low- to middle-income households, with signs that the problem is spreading to higher-income groups. Government measures will therefore be critical, including household debt restructuring, soft loans, and credit guarantees for SMEs. The success of these financial measures, however, must go hand-in-hand with policies to boost household income and enhance SME competitiveness
5. How will political uncertainty affect fiscal policy and the economy?
Political uncertainty following the dissolution of parliament on December12 has affected fiscal policy implementation. Investment budget disbursement for FY2026 is expected to be lower than normal level, while preparation of the FY2027 Budget Act is likely to face some delays, resulting in slower investment spending early in FY2027. Although the immediate impact may not be severe, uncertainty remains high. In addition, medium-term government spending will face tighter fiscal constraints due to efforts to implement fiscal reforms aimed at reducing budget deficit and controlling public debt ratio. These will be key tasks for the new government to maintain Thailand’s confidence from credit rating agencies and ensure long-term fiscal stability.
6. Structural reform is the way forward, but how sustainable will it be? ?
The Thai economy stands at a critical turning point, facing mounting pressures on multiple fronts — from external factors such as the trade war and potential risks to the country’s credit rating, to long-standing domestic vulnerabilities. Structural reform has therefore become an unavoidable path forward. Thailand must continue and accelerate the implementation of comprehensive economic reforms. With a focus on long-term policies to enhance the country’s competitiveness, the strategy emphasizes upgrading business support measures and restructuring the economy in partnership with the private sector, for example, removing investment barriers and promoting high-potential industries through a reform platform in collaboration with businesses socalled ‘Reinvent Thailand’.
7. Which businesses can move forward, and how can they adapt to survive?
In 2026, Thai businesses will be driven by five key challenges:
(1) global supply chain volatility,
(2) fragile household purchasing power,
(3) policy uncertainty,
(4) intensifying domestic and international competition, and
(5) mounting pressures from rapidly evolving megatrends.
Overall, downside risks outweigh the positives, suggesting that business activity will remain subdued in 2026. Sectors facing pronounced slowdown and heightened risks include manufacturing — particularly electronics, automotive, petrochemical, and steel — as well as the real estate sector, which is expected to remain weak. Meanwhile, service sectors such as tourism and retail trade should continue to expand, albeit amid elevated uncertainties that businesses will need to navigate carefully.
However, certain business segments — even those facing slowdown risks — still have opportunities to grow if they can adapt effectively and leverage emerging megatrends. Firms that integrate new innovations, align with evolving consumer and sustainability trends, or diversify into new and high-potential markets will be better positioned to capture growth opportunities.
Nonetheless, successful adaptation will also require proactive government support through both short- and long-term measures. In the short term, policies should focus on stimulating demand, restoring confidence, and enhancing liquidity. Over the longer term, structural measures will be essential to remove investment barriers, strengthen existing industries, and foster the sustainable growth of high-potential sectors.
The global economy is expected to slow next year as the impact of U.S. tariff becomes more pronounced.
The global economy is projected to slow to 2.5%YOY in 2026, down from 2.7%YOY in 2025, as the full-year impact of U.S. tariff barriers weighs on global trade following the dissipation of front-loading effects. Although exports of AI-related electronic products are expected to remain robust, global growth will increasingly rely on AI-driven investment, particularly in the U.S., where both private investment and wealth creation through asset prices in AI-related sectors will serve as key growth engines.
Investment in technology and data centres will also benefit emerging economies that are part of the global technology supply chain. Meanwhile, global monetary and fiscal policies will remain accommodative, but constraints are becoming more evident. Some economies are reaching the end of their rate-cutting cycles, while others continue to face inflationary pressures. On the fiscal front, higher borrowing costs and elevated public debt levels are limiting the room for further policy support to sustain economic growth going forward.
Global monetary policy in 2026 is expected to remain accommodative overall (except in Japan). However, the scope for further rate cuts is increasingly limited, as most central banks have already lowered policy rates substantially this year and are approaching the end of their easing cycles. SCB EIC expects the U.S. Federal Reserve (Fed) to gradually cut its policy rate by another 50 bps before maintaining rates at levels higher than those seen prior to the COVID-19 pandemic due to persistent inflation risks. The European Central Bank (ECB) is projected to keep its policy rate at 2% throughout 2026, while the Bank of Japan (BOJ) is expected to continue raising rates gradually to 1.25% by next year, supported by clearer evidence of sustained annual wage increases.
Key global economic risks in 2026 include: (1) Trade policy uncertainty,particularly regarding U.S. import tariff measures under consideration — both product-specific tariffs such as on electronics and potential transshipment tariffs; (2) Geopolitical tensions, stemming from the U.S. scaling back its support for NATO and Europe, as well as rising diplomatic frictions between Japan and China; (3) Global financial market risks, especially the possibility of a significant correction in AI-related asset prices following their rapid surge; and (4) Climate-related impacts, as extreme weather events and natural disasters are expected to intensify worldwide.
By : Economic Intelligence Center,
Siam Commercial Bank. (SCB EIC)
SCB EIC Online : www.scbeic.com
Line : @scbeic
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