Thailand

Thailand experienced comparatively moderate GDP growth in the decade prior to the Covid-19 crisis, with an average annual growth rate of +3.6%. The pandemic had a large negative impact on the economy (contracting by -6.1% in 2020), followed by a slow recovery (+2.1% on average across 2021-2023). A slight acceleration in 2024 resulted from robust private consumption, accelerating inbound tourism and recovering exports. Some of these tailwinds and additional government programs supported growth in 2025 (+2.1% estimated), but increased geopolitical tensions will have a negative impact in the short-term. Notably, the trade war and slowing external demand from the US will pose risks to Thailand’s manufacturing output and export growth, either directly or indirectly through Thai manufacturers linked to Chinese firms. While these effects could be partly offset by domestic demand and rising European demand, we forecast a slowdown to +1.8% in 2026 and moderate growth of +2.2% in 2027. In the longer run, Thailand stands to benefit from higher FDI inflows as multinationals look to diversify their supply chains away from China – provided it is incentivized to and puts the right policies in place to improve its competitiveness relative to regional peers.

Overall, the short-term financing risk in Thailand is low. Thailand's financial system has shown resilience, but vulnerabilities remain. The fiscal deficit rose significantly during the pandemic and has moderated since, but should remain higher than before the pandemic at an annual average of -2.5% of GDP during the 2025-2027 period. As a result, the public debt-to-GDP ratio rose from an average of 42% in the 2010s to 61% in 2022 in the wake of the pandemic. It has continued edging up in recent years and going forward, we expect public debt to reach 68% of GDP by 2027. On the positive side, this is not critical as most of the debt is domestic and with long maturities. In terms of the external balance, Thailand’s current account balance posted moderate deficits in 2021-2022 as the tourism sector suffered from the pandemic and rising global energy prices boosted the value of imports in 2022. The current account deficit returned to a surplus as soon as 2023 and should average 1.5% of GDP in the 2025-2027 period. This will be driven primarily by the recovery in the tourism sector (albeit partial) and moderating energy prices. In addition, the promotion of free trade and deeper regional integration through the signing of free-trade deals will be on Thailand’s external policy agenda in the medium term.

Former prime minister Paetongtarn Shinawatra of the Pheu Thai Party (PTP) was dismissed by a decision of the Constitutional Court in September 2025 following  ethical violations in a phone call with her Cambodian counterpart. Supported by the opposition party People’s Party (PP), formerly the Move Forward Party, Anutin Charnvirakul, leader of the Bhumjai Thai Party (BJT), was elected to the premiership with the promise to dissolve the parliament by January 2026. The election in February resulted in a strong performance by the BJT, which became the party with the highest number of seats in the House of Representatives. It is expected to form a coalition with the PTP, thereby securing a narrow parliamentary majority, while the PP will remain in the opposition. In the short to medium term, risks to political stability in Thailand will remain. We expect the new coalition to defend traditional institutions while addressing voters’ key concerns, particularly the relocation of factories to neighboring countries and ongoing tensions along the border with Cambodia. Overall, the military is likely to remain powerful. The risk of a military coup remains quite low, especially given the army’s focus on ongoing border tensions, but it could increase should the coalition government fall apart. Finally, the divisive issue of reforming the monarchy will also continue to weigh on political stability: Although the process of rewriting the constitution officially began in early 2026, we do not expect significant progress over the course of the year. While there may be occasional episodes of political tension during the process, we do not expect them to persist.