Thailand: Risks to its economy rise in 2026 amid global and domestic uncertainty

Economists caution that Thailand enters 2026 facing a confluence of pressures that could restrain growth and unsettle investor sentiment. Headline GDP expansion is projected at around 1.6%, with momentum dampened by both external shocks and internal structural weaknesses. A slowdown in domestic demand—particularly pronounced in the agricultural sector—underscores the fragility of the recovery and raises concerns about the country’s competitiveness relative to its regional peers.

Global headwinds add to uncertainty

Geopolitical tensions are set to complicate the backdrop for trade, commodity prices, and capital flows. Strains between the United States and Venezuela, coupled with potential spillovers involving Iran, introduce risks that could transmit via energy markets and supply chains. Heightened competition in global markets further challenges Thai exporters, who already face thinning margins and slower demand growth in key destinations.

These external pressures converge at a time when many economies are recalibrating industrial policies, potentially diverting investment and trade away from Thailand. As a result, export performance may remain uneven, with periodic fluctuations tied to geopolitical developments and shifting demand patterns.

Domestic challenges weigh on growth

At home, several structural issues are limiting the economy’s capacity to accelerate:

• Weak household consumption due to high debt levels and soft income growth, especially among rural households.
• Aging demographics that constrain labor supply and increase fiscal pressures over the medium term.
• Persistent structural fragilities, including productivity bottlenecks and sectoral imbalances.
• Investment hesitancy amid policy uncertainty and intensified international competition for capital.

The agricultural sector stands out as a pressure point. Lower farm incomes and rising input costs are curbing spending in rural areas, with knock-on effects on small businesses and services. Political uncertainties and policy transitions have also tempered risk appetite, leading some investors to adopt a wait-and-see stance.

Outlook and regional competitiveness

Against this backdrop, Thailand’s growth is expected to trail that of several ASEAN neighbors in 2026. Analysts warn that without meaningful reforms and renewed investment, the country risks a gradual loss of competitiveness. Over the next 15 years, Thailand could slip from second to fifth place among ASEAN economies by size, reflecting slower trend growth, demographic headwinds, and the challenge of moving up the value chain.

The near-term forecast of roughly 1.6% GDP growth underscores the urgency of addressing structural constraints. While tourism and selective manufacturing niches may provide pockets of resilience, these are unlikely to offset broad-based softness without deeper improvements in productivity and investment.

Key risk channels to monitor in 2026

• Exports: Exposure to geopolitical disruptions and price volatility could lead to inconsistent shipments and earnings.
• Domestic demand: High household debt and subdued real incomes may limit the multiplier from fiscal and monetary support.
• Credit conditions: If risk perceptions rise, borrowing costs for firms and households could increase, deterring investment and consumption.
• Public investment: Delays or uncertainty in project execution may blunt the impact of planned infrastructure spending.
• Confidence: Mixed policy signals or political frictions can weaken business sentiment and defer capital expenditure.

Policy priorities that could mitigate risks

Although the balance of risks is tilted to the downside, targeted measures can support stabilization and medium-term competitiveness:

• Strengthen household resilience through debt restructuring frameworks and targeted relief for vulnerable groups, particularly farmers.
• Accelerate high-quality public investment and ensure predictable project pipelines to crowd in private capital.
• Boost productivity via skills upgrading, digitalization support for SMEs, and streamlined regulations that lower the cost of doing business.
• Encourage sectoral diversification, including value-added manufacturing and services, to reduce dependence on narrow export segments.
• Enhance policy clarity and consistency to restore investor confidence and reduce uncertainty premiums.

Bottom line

Thailand approaches 2026 with subdued growth, forecast at about 1.6%, and heightened vulnerability to global shocks and domestic constraints. Weak demand—especially in agriculture—alongside structural issues such as high household debt and an aging population, presents a challenging mix. Without timely reforms and a clear investment agenda, competitiveness may erode and growth could continue to lag regional peers. Decisive policy actions that lift productivity, support households, and catalyze private investment will be critical to stabilizing momentum and safeguarding Thailand’s standing within ASEAN in the years ahead.