BoT: Thailand's 2026 growth is worrisome on fiscal budget delay

BoT: Thailand's 2026 growth is worrisome on fiscal budget delay

Thailand's economic growth prospects for 2026 are under scrutiny as political uncertainty and potential fiscal budget delays cast a shadow over the country's economic landscape. The recent removal of Paetongtarn Shinawatra as Prime Minister by the Constitutional Court has exacerbated the political instability, with both Pheu Thai and Bhumjaithai vying for support to appoint a new leader [1].

Economists and financial analysts are expressing concern over the potential impact of political volatility on Thailand's economic growth. Lavanya Venkateswaran, an economist at OCBC Bank in Singapore, noted that political instability could further strain Thailand's already weak economic growth momentum [1]. The Bank of Thailand (BOT) has indicated that it may consider additional interest rate cuts if economic growth significantly slows down or unexpected shocks occur [1]. However, the room for further cuts may be limited due to structural constraints and external pressures [1].

Nomura Holdings Inc. has warned that Thailand's credit rating may be downgraded by Moody's in the coming quarters due to growing political uncertainty and ongoing economic stagnation [1]. In April 2025, Moody's lowered its outlook on Thailand's credit rating from stable to negative, citing the potential impact of US import tariffs and global uncertainty on Thailand's trade and economic growth [1].

Despite these challenges, there is some positive news. The House of Representatives passed the 2026 fiscal budget of 3.78 trillion baht on September 1, with the Senate expected to approve it soon. This move is expected to alleviate concerns among investors over potential budget delays [1].

However, political instability could impact Thailand's credit rating, as Amonthep Chawla, Assistant Managing Director and Head of Research at CIMB Thailand, warned. He explained that the current political situation, coupled with Thailand's economic slowdown, presents risks to the country's credit outlook [1]. While a downgrade may not cause an immediate capital outflow or significant depreciation of the Thai baht, it remains a trend to watch and Thailand must remain vigilant in addressing these challenges [1].

The Bank of Thailand's Monetary Policy Committee (MPC) is scheduled to meet on October 8, 2025, where an interest rate cut is expected. Tim Leelahaphan, Executive Director of Economics for Thailand and Vietnam at Standard Chartered Bank (Thailand), expects a 0.5% rate cut due to the ongoing political uncertainty [1]. However, other analysts predict a more modest cut of 0.25% in Q4 2025 [1].

In conclusion, Thailand's economic outlook for 2026 is worrisome due to potential fiscal budget delays and political instability. The country must navigate these challenges to ensure sustainable economic growth and maintain its credit standing. Investors and financial professionals should closely monitor the situation as it evolves.

References:
[1] https://www.nationthailand.com/business/economy/40054896