BANGKOK, June 20 — Consumption has remained tepid despite a government stimulus programme, few of its economic engines are firing, and uncertainty wrought by United States (US) President Donald Trump's reciprocal tariffs means that the Thai economy could grow just over one per cent this year.
Now, Southeast Asia's second-largest economy faces a fresh challenge: a new round of political chaos that can 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. This could make things even more complicated," Thai Chamber of Commerce vice chairman Visit Limlurcha told Reuters.
The most significant short-term concern is the passage of a 3.78 trillion baht (approximately RM489.8 billion) budget for the 2026 fiscal year, which is set to start on October 1, and must be passed through Parliament over the next few months.
That process could get stalled if Paetongtarn, who is under scrutiny for her handling of a long-standing border dispute with neighbouring Cambodia, dissolves Parliament and triggers new elections.
"If Parliament is dissolved before the budget is passed, the process will be delayed significantly," said Merchant Partners Asset Management managing director Prakit Siriwattanaket.
Finance Minister Pichai Chunhavajira told the press today that he is optimistic Parliament will approve the budget by October.
"I am confident that those who are in charge of this matter know that the budget is very important for Thailand," he said.
Thailand's economy has lagged behind regional peers as it struggles with high household debt and borrowing costs, as well as sluggish demand from China, which is also a key tourism market.
Last month, Pichai said that it expanded 2.5 per cent last year, and growth could be further halved this year due to US tariffs.
Thailand's stock market has been the worst-performing bourse in Asia so far this year, down 23.4 per cent. 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 per cent annually during April-May 2025, OCBC economists Lavanya Venkateswaran and Jonathan Ng said in a report yesterday, warning of a "double whammy" for the economy if both government expenditure and exports weaken.
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Thailand's Prime Minister Paetongtarn Shinawatra (centre) and Second Army Region Commander Lieutenant General Boonsin Padklang (centre right) receives flowers upon arriving in Ubon Ratchathani province, Thailand, on June 20, 2025. — Picture by REUTERS via GOVERNMENT HOUSE OF THAILAND[/caption]
Protests and tariffs
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 the Parliament.
Such an arrangement will prolong political instability and raise the spectre of street protests, which have been part of previous crises and could hit one of Thailand's key remaining economic engines: tourism.
"I am worried. I do not want the situation to cause people to take to the streets. If they take to the streets, it will hit tourism," said Thai Hotels Association president Thienprasit Chaiyapatranun to Reuters. His organisation represents around 1,000 hospitality establishments.
Activists — including those who have in the past agitated against Paetongtarn's father, the divisive former premier Thaksin Shinawatra — met today 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 US, which has threatened to impose a 36 per cent tariff rate on imports from Thailand, said Yuanta Securities analyst Natapon Khamthakrue.
"The United States certainly would not want to talk to a government without full power or with few votes," he said.
Earlier, Pichai said that trade negotiations with Washington will not be concluded in a short period.
"Negotiations are never simple for any country, and countries that have begun talks still have not reached a conclusion," he told the press.
Nonetheless, some business chambers and analysts are holding out hope that a political resolution can be found quickly, minimising 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, the timing could not be more inconvenient considering external headwinds," OCBC's economists said.
— Reuters
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A general view inside a shopping mall in Bangkok, Thailand, on June 20, 2025. — Picture by REUTERS[/caption]
