BANGKOK: Thai Prime Minister Paetongtarn Shinawatra on Wednesday proposed a 3.78 trillion baht (US$115.5 billion) budget for the 2026 fiscal year to parliament, in a bid to stimulate Southeast Asia’s second-largest economy as it grapples with sluggish growth and looming external risks—chief among them, steep US tariffs.
The draft budget bill, which will be debated over the next four days, represents a 0.7% increase in government spending from the previous fiscal year and aims to narrow the deficit to 860 billion baht, or 4.3% of GDP, down from 4.5% in the current financial year ending September 2025.
“The deficit budget policy is aimed at maintaining economic stability, including supporting a recovery and promoting growth at an appropriate level,” the bill reads, signalling the administration’s intention to carefully balance stimulus with fiscal responsibility.
The proposed budget assumes GDP growth between 2.3% and 3.3% in both 2025 and 2026, with inflation forecast to remain muted, ranging between 0.5% and 1.5%. These targets come as Thailand continues to lag behind regional peers. In 2024, the economy expanded by just 2.5%, and in the first quarter of 2025, it recorded year-on-year growth of 3.1%. However, the National Economic and Social Development Council (NESDC) recently downgraded its full-year outlook to between 1.3% and 2.3%, citing external headwinds.
One of the most pressing concerns is the expiration of a US tariff moratorium, which could result in a 36% tariff on Thai exports to the United States—Thailand’s largest export market—if a deal is not struck by July. While the baseline US tariff rate stands at 10% under current provisions, Thai goods could be significantly disadvantaged if negotiations fail.
The budget does not yet factor in the potential fallout from these tariffs, raising questions among analysts about whether the fiscal planning is adequately forward-looking. Economists suggest that any significant disruption to export performance could force the government to revise spending or introduce supplementary measures later in the year.
Despite these uncertainties, the bill is expected to pass in parliament, although political tensions within the ruling coalition may complicate proceedings. The Pheu Thai-led government is facing growing friction with its largest partner, the Bhumjaithai Party, particularly over the controversial casino bill, which seeks to legalise gambling within integrated entertainment complexes to drive tourism and generate new revenue streams.
Disagreements have also emerged over constitutional reform and cannabis policy. The latter remains a contentious topic since cannabis was decriminalised in 2022, with growing calls—especially from conservative factions—for tighter regulation on its sale and use.
A failure to pass the budget would have significant political ramifications. Under Thai constitutional law, Prime Minister Paetongtarn could either resign and allow parliament to select a new leader or dissolve the lower house and call for a snap election—moves that could unsettle markets and delay economic policymaking.
The government’s commitment to deficit financing to spur economic momentum may be necessary, but it also comes at a time when global financial conditions are tightening and investor sentiment remains cautious. Analysts are watching closely to see how the administration navigates external shocks, internal policy divisions, and the broader challenge of accelerating structural reform in an economy long dependent on tourism and exports.
As parliament begins debate, all eyes will be on whether the government can secure enough political support to implement its budget vision—and if so, whether it will be enough to steer Thailand’s economy toward more resilient and inclusive growth in the years ahead.
