Thailand’s newly formed government confronts a challenging economic landscape marked by high household debt, inefficient investments, and restrictive trade policies. Bold reforms are essential to draw in future-focused industries and ensure sustainable growth.
Key Points
- The conservative Bhumjaithai party won a decisive victory in February 2026, campaigning on stability, but inherited an economy still struggling to recover from the pandemic.
- GDP growth is forecast at just 1.6% for 2026 — the lowest in ASEAN — due to constrained public finances, unproductive investment, and a strong baht eroding export competitiveness.
- While exports surged in 2025, especially electronics to the U.S., tariff uncertainty, Section 301 investigations, and inefficient allocation of capital hinder long-term gains.
- Liberalising foreign ownership (e.g., amending the Foreign Business Act), opening key service sectors (legal, logistics), and joining the CPTPP are critical to attract green manufacturing and high-value industries.
- Thailand’s 14 FTAs cover only 18 markets, with low utilisation due to complex rules of origin — unlike Vietnam, which has leveraged CPTPP to expand exports.
Without structural reforms beyond stimulus, Thailand risks missing out on global supply chain shifts and future industrial investment, leaving it economically stagnant despite short-term export gains.
The Commerce Ministry has announced plans to remove 10 service sectors — from software development to petroleum exploration — from the restricted list, which is a step in the right direction.
The sectors that have been opened do not include those critical to manufacturing firms, such as legal, accounting, and logistics services, which remain heavily restricted. According to the OECD, Thailand ranks among the most restrictive countries in terms of barriers to services trade. Without liberalizing these sectors, even the most generous investment incentives will find it challenging to attract future-focused industries.
Access to export markets is another critical area needing improvement. Thailand currently holds 14 free trade agreements (FTAs), granting preferential access to just 18 markets—significantly fewer than Vietnam’s broader market reach. Additionally, FTA utilization remains a challenge, as nearly 20% of eligible exports fail to leverage preferential terms due to the high costs or complexities of complying with rules of origin, particularly for smaller firms.
Thailand relies heavily on imported inputs, which poses a vulnerability as rules of origin become stricter due to geopolitical pressures. Joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could mitigate this risk by broadening the network of countries, such as Japan, whose inputs are eligible under origin requirements, while also enhancing market access. Vietnam, which joined the CPTPP in 2019 and depends on foreign inputs even more than Thailand, has experienced a significant surge in exports to new markets since its accession.
Source : Thailand’s economic recovery depends on opening up | East Asia Forum
