The Thai economy faces challenges on all fronts. Externally, it is difficult to rely on, while internally, fragile. This presents a challenge for the new government to restore confidence.

Dr. Yanyong Thaicharoen, Chief Executive Officer, Economic and Sustainability Research, Economic and Business Intelligence Center (SCB EIC), revealed that the Thai economy will grow by 1.8% this year and slow to 1.5% in 2026. Growth may average less than 1% in the second half of this year, and there is also a risk of a technical recession, which could weaken the economic momentum. Internal and external challenges will come with increasing fiscal constraints, making it harder for the Thai economy to rely on the world.

Trade war: The 19% US tariff is starting to put pressure on Thai exports to the US, slowing down. Many product groups are starting to contract and are likely to continue contracting. The baht is stronger than other currencies: the strongest since the 1997 crisis, inconsistent with fundamentals, further pressuring exports and tourism. Foreign tourist arrivals remain lower than last year. Signs of bottoming out: Tourists are spending more cautiously. Thailand may be at a disadvantage to competitors due to the strong baht. Domestic fragility will increase.

SMEs are vulnerable: Average income remains lower than pre-COVID, profits are low, and there are more "zombie" companies. The labor market is weakening: unemployment in some groups is rising, working hours are reduced, and income is declining. Fiscal constraints: Risk of slow disbursements, public debt is nearing the ceiling, and there is a risk of a national credit rating downgrade. SCB EIC expects the Monetary Policy Committee (MPC) to cut interest rates again this year to 1.25% and again early next year to 1% to ease financial conditions and reduce debt burdens and credit risk. The new government should focus on three economic policies (3S): 1) Stabilization to restore confidence. Focus on clear, achievable goals, coupled with proactive communication and effective advocacy.

2) Stimulate the economy by emphasizing targeted, rapid, and temporary fiscal measures, alongside easing tight financial conditions through policy interest rate cuts, credit guarantee mechanisms, and baht management. 3) Structural reform: Enhance government policies to support the business sector by addressing regulatory barriers, identifying new markets, promoting green investment, and laying the foundation for economic restructuring through policy frameworks to promote future industries, developing labor skills, and implementing fiscal reforms.

Global economic growth is expected to slow to 2.5% in 2025 and 2.4% in 2026 due to Trump's policies pressuring global trade and investment. However, in the coming period, investment will drive the transition to a digital economy, AI, and clean energy. Foreign investment in strategic industries will also be accelerated, as will the Friendshoring, Reshoring, and Nearshoring trends.

Thailand must strategically attract FDI amid a polarized world. FDI growth in Thailand remains a key area, particularly in the data center and future food sectors, while existing target industries such as electronics and automotive continue to grow. However, Thailand faces pressure from global trade policy uncertainty and the repatriation of investment to the USMCA, Japan, and the EU, which have advantages over their trade agreements with the United States. Furthermore, Thailand's competitiveness and investment conditions remain increasing.

Thai entrepreneurs must raise production standards, labor skills, and connect global supply chains. The government must accelerate regulatory adjustments, reduce procedural barriers, and create an ecosystem conducive to investment.

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