Thailand's economy teeters as political turmoil threatens recovery efforts
Thailand's economy is already on the ropes.
Consumption has remained tepid despite a government stimulus program, 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 percent this year.
Now, Southeast Asia's second-largest economy faces a fresh challenge: a new round of political chaos that could 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,' 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 ($115 billion) budget for the 2026 fiscal year, which starts on October 1, that must pass through parliament over the next few months.
That process could get stalled if Paetongtarn, who is under siege for her handling of a festering border row with neighboring Cambodia, dissolves parliament and triggers fresh elections.
'If parliament is dissolved before the budget is passed, the process will be delayed significantly,' said 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 percent last year, and growth could be further halved this year due to US tariffs, Finance Minister Pichai Chunhavajira said last month.
Thailand's stock market has been the worst-performing bourse in Asia so far this year, down 23.4 percent. 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 with government spending, which has dropped by over 38 percent annually during April–May 2025, OCBC economists Lavanya Venkateswaran and Jonathan Ng said in a report on Thursday, warning of a 'double whammy' for the economy if both government expenditure and exports weaken.
Amid the ongoing tumult, Paetongtarn may be able to hang on to her premiership, and a coalition led by her Pheu Thai party could retain its majority — albeit in a weaker position compared to its previous grip on parliament.
Such an arrangement will prolong political instability and raise the specter of street protests, which have been part of previous crises and could hit one of Thailand's key remaining economic engines: tourism.
'I'm worried. I don't want the situation to cause people to take to the streets,' Thienprasit Chaiyapatranun, president of the Thai Hotels Association, which represents around 1,000 hospitality establishments, told Reuters.
'If they take to the streets, it will hit tourism.'
Activists — including those who have in the past agitated against Paetongtarn's father, the divisive former premier Thaksin Shinawatra — met on Friday to plan a major protest next week and demanded the prime minister's resignation.
A government lacking full authority may also struggle in ongoing trade negotiations with the United States, which has threatened to impose a 36 percent tariff rate on imports from Thailand, said Natapon Khamthakrue, an analyst at Yuanta Securities.
'The United States certainly would not want to talk to a government without full power or with few votes,' he said.
Some business chambers and analysts are, nonetheless, holding out hope that a political resolution can be found quickly, minimizing damage to the Thai economy, which has been rattled by multiple coups in the last eight decades — including two against governments led by the Shinawatra family.
'Although the economy is no stranger to political uncertainty,' OCBC's economists said, 'the timing could not be more inconvenient considering external headwinds.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Arabiya
3 hours ago
- Al Arabiya
IAEA chief warns strike on Iran's Bushehr plant would create nuclear disaster
The head of the UN atomic watchdog warned Friday that an Israeli strike on Iran's southern nuclear plant of Bushehr could trigger a regional disaster, adding that radiation had not yet been detected in the conflict.
Arab News
6 hours ago
- Arab News
Taiwan to hold recall election for lawmakers that could reshape parliament
TAIPEI: Taiwan will hold a recall vote for around one quarter of parliament's lawmakers — all from the main opposition party — next month, the election commission said on Friday, a move which could see the ruling party take back control of the Lai Ching-te won the presidency last year, his Democratic Progressive Party (DPP) lost its parliamentary majority, leaving the Kuomintang (KMT) and the much smaller Taiwan People's Party with the most KMT and the TPP have passed a series of measures, including swingeing budget cuts, angering the DPP, though the campaigns to gather enough signatures for the recalls were led by civic opposition has 62 of parliament's 113 seats and the DPP holds the remaining 51. The recall votes for 24 KMT lawmakers will take place on July 26, the election commission DPP has given full support for the recalls, releasing a video this week calling on people to vote yes and 'oppose the communists' — a direct reference to China and what the party says is the opposition's dangerous cosying up to KMT has vowed to fight what it calls a 'malicious recall' that comes so soon after the last parliamentary election in January 2024.'The KMT calls on the people of Taiwan to oppose the green communists and fight against dictatorship, and vote 'no',' the party said in a statement after the recall vote was announced, referring to the DPP's party KMT says its engagement with China, which views separately-governed Taiwan as its own territory, is needed to keep channels of communication open and reduce has rejected multiple offers of talks from Lai, branding him a 'separatist,' and has increased military pressure against the campaigns against DPP lawmakers failed to gather enough valid the recalls to be successful, the number of votes approving the measure must be more than those opposing it, and also exceed one-quarter of the number of registered voters in the constituency, so turnout will be the recall votes are successful, there will be by-elections later this year to select new next parliamentary and presidential elections are not scheduled until early 2028.
Al Arabiya
6 hours ago
- Al Arabiya
Nepal PM welcomes ‘good news' gas discovery
Nepal's Prime Minister KP Sharma Oli welcomed as 'good news' on Friday the discovery of large methane gas reserves in the Himalayan nation in a joint study with China. 'The news that there are 112 billion cubic meters of gas... is good news,' Oli said in a Facebook post. The Department of Mines and Geology said the gas was discovered in the western district of Dailekh. 'This is an initial estimate. Lab tests of the samples will give more information on the characteristics of the reserve,' Prakash Luitel, a geologist at the department, told AFP. The study was conducted with the government-run China Geological Survey. 'The final report is expected in December. We will then get better information for the next stage,' said the mines and geology department's spokesman Mukunda Bhattarai. He said drilling was done at a depth of up to 4,013 meters (13,166 feet). Petroleum products remain landlocked Nepal's top import despite Kathmandu boosting energy production in recent years through a dam-building spree. Nepal spent more than $1.5 billion on petroleum products over the past 10 months, accounting for nearly 16 percent of total imports, according to central bank data.
