Bangkok: Entering the second half of 2026, the Thai economy is assessed to be facing significant challenges from both internal and external factors. Dr. Supavud Saichue has analyzed the worrying overall economic picture, pointing out that Thailand is confronting low and uneven growth, a warning sign that cannot be ignored.
According to Thai News Agency, the Bank of Thailand (BOT) assesses that the Thai economy is experiencing low growth and faces high levels of inequality, particularly among SMEs, which have limited ability to adapt to fierce competition from cheap imports from China. This has resulted in a massive trade deficit with China exceeding 1 trillion baht in the first five months of the year. Meanwhile, households are under pressure from rising living costs and oil prices, contrasting with stagnant incomes. As a result, the BOT forecasts GDP growth next year may fall to just 1.8%.
Dr. Supavud analyzes four key risk factors to watch in the second half of the year that Thailand needs to prepare for. Trade uncertainty with the United States is a significant concern, as Thailand has not yet reached a trade agreement with the US and risks facing tariffs under Section 301 regarding forced labor and overproduction. Meanwhile, neighboring countries like Vietnam and Indonesia have made more progress in negotiations than Thailand.
Another pressing issue is the Super El Ni±o Crisis. The region entered an El Ni±o phase in June, with a 63% chance of becoming a "Super El Ni±o," which would result in severe drought from the end of this year to the beginning of next year, severely impacting agricultural production and water reserves in reservoirs.
The clean energy transition also presents challenges. Although the government has a budget of 200 billion baht for solar rooftop projects, problems remain regarding the unprofitability of buyback prices and the slow approval process of the electricity authority, which have become significant bottlenecks.
Furthermore, Dr. Supavud warns of running out of policy ammunition. Thailand may no longer have the capacity to use both monetary and fiscal policies to stimulate the economy, as policy interest rates are low but inflation is so high that real interest rates are negative. Meanwhile, the 2027 budget is extremely tight due to increasing recurring expenditures.
The budget crisis and public debt nearing its ceiling are most worrying, particularly the structure of Thailand's budget, which is consumed by recurring expenditures, especially civil servant welfare, pensions, and healthcare costs, which grow at 5% annually due to an aging society. This squeezes investment spending down to only 20%, the legal minimum. Dr. Supavud calculates that Thailand's public debt to GDP ratio could soar to 68.5% - 70% by fiscal year 2026-2027, rapidly approaching the 70% fiscal discipline ceiling.
Dr. Supavud concluded that when "the bullets run out," Thailand can no longer rely on short-term stimulus policies. The only solution is "reform" to increase the efficiency of the public sector, reduce complex procedures, and enhance competitiveness without resorting to massive spending. This must be coupled with improving tax collection efficiency to ensure sufficient government revenue to cover future rising expenditures.