Amidst a backdrop of sluggish economic growth and political turnover, legislators in Thailand recently passed the 2026 budget, giving us a window into the country’s fiscal condition and how it plans to try and revive growth in the year ahead. At 3.8 trillion baht (roughly $116 billion), spending is set to increase 0.7 percent compared to the previous budget of 3.75 trillion. The plan includes stimulus measures, but they are notably scaled back compared to recent years.
As with any budget analysis, we start with the overall economic picture. Since the COVID-19 pandemic, Thailand has been battered by economic headwinds, including rising geopolitical and trade tensions. The economy expanded by around 2.5 percent in 2024, and that figure is expected to fall further to 2.2 percent in 2025. This means despite big injections of cash through the digital wallet scheme, growth is continuing to slow as global economic conditions become more challenging. It’s a far cry from 2017 and 2018, when the economy was growing more than 4 percent a year.
There’s no big mystery here. Thailand successfully built itself into a regional export powerhouse, which means economic activity has for many years been based around exporting surplus production and services like tourism. But the current state of the global economy, rife with protectionism, economic nationalism, and a wildly unpredictable United States, is an unfriendly environment for net exporters like Thailand. Tourism remains below its pre-pandemic peak, and inbound arrivals may be lower this year than last year.
To compensate for slowing growth, and the weak recovery in exports, the government has had to run large fiscal deficits ever since the pandemic. Some countries in the region, like Singapore and Malaysia, have been narrowing or eliminating their deficits. Others, like Indonesia and the Philippines, continue to run deficits but have higher growth rates, which places less strain on the government’s fiscal capacity.
In Thailand, the 2026 budget envisions a deficit of 860 billion baht ($26 billion), about 4.3 percent of GDP. This is based on optimistic projections that the economy will grow between 2.3 and 3.3 percent in 2026. The Asian Development Bank recently estimated that Thailand’s economic growth would come in much lower than that, at 1.6 percent in 2026. Whatever the final number is, it seems likely that deficits will remain a key feature of Thailand’s fiscal reality for a while.
What are the spending priorities for 2026? Based on preliminary spending reports, it seems that from last year’s appropriated budget of 3.75 trillion, only 90 percent was actually spent in the 2025 fiscal year. The majority of this surplus was realized from the Central Fund, a large spending pot under the control of the prime minister. Much of this savings comes from the government’s decision to cancel the final phase of the digital wallet program earlier this year. The unused funds will reportedly be rolled over to help fund more targeted economic stimulus measures in 2026.
These include an injection of capital for state-owned Bank for Agriculture and Agricultural Co-operatives, and funds for millions of welfare card holders. This is intended to cushion the impact of rising living costs, and offer debt relief for cash-strapped borrowers. The idea is that consumers need to spend more to offset weak exports, and subsidies and debt relief will help with this. Many analysts previously noted that targeted policies like these would probably be a more effective way to do stimulus than the digital wallet, which sacrificed precision for scale.
Of course, Thailand moved forward with the digital wallet anyway and the state now finds its fiscal capacity under some pressure. As a result, the size of these new measures is relatively modest. The budget for the subsidy scheme is reportedly 62 billion baht or roughly $2 billion. This will help, but with an economy the size of Thailand’s, it’s unlikely to be a decisive course corrector. For now, Thailand’s economic and fiscal realities are forcing the government into something of a holding pattern, doing their best to pump more targeted stimulus into the economy while borrowing to cover deficits.
If things continue like this, the government may begin contemplating spending cuts. This would of course be unpopular, and infighting among Thailand’s political class makes crafting an effective response even more difficult at a time when strong leadership and good policies are most needed. The alternative is to continue treading water in the hope that conditions in the global economy will ease, and exports will recover. If that is the plan, I would merely note that Donald Trump still has three years left in office.