Political Uncertainty Hits Thai Investor Confidence

The Federation of Thai Industries (FTI) has warned that political uncertainty is damaging both domestic and foreign investor confidence, raising concerns about further setbacks for the Thai economy.

The concerns come after Paetongtarn Shinawatra, acting as both prime minister and culture minister, testified before the Constitutional Court. The hearing was in response to a petition from 36 senators who have asked the court to rule on whether her premiership has ended. The court has set a deadline for final arguments to be submitted by 27 August, with a verdict expected on Friday, 29 August.

FTI President Kriengkrai Thiennukul stated that the ongoing political instability is particularly affecting projects awaiting approval or the start of construction, many of which may be indefinitely delayed.

This internal issue, he noted, is compounded by external factors such as trade protectionism, including President Donald Trump's proposed 19% reciprocal tariffs, and unpredictable geopolitical events.

“The most important factor is internal, especially government stability,” Kriengkrai stated. "The government must urgently address this to avoid losing out in competition with neighbouring countries. The private sector is still hoping for strong and stable Thai politics, as it is a crucial factor impacting investor confidence."

Kriengkrai highlighted three key issues the country must tackle in the second half of the year:

Surge in Chinese Imports: The ongoing trade talks between the US and China have created a risk of Chinese goods flooding the Southeast Asian market, which could hurt Thailand's exports. In the first half of this year, Thailand's exports to Southeast Asia fell from 24-25% to just 21%, while Chinese goods entering Thailand increased by 30%.

Slowing Exports to the US: Exports to the United States are expected to slow down in the second half of the year due to high stock levels from the first half.

Slump in Tourism: Tourist arrivals in the first six months of the year were down by almost 6% compared to the same period in 2024. Kriengkrai urged the government to implement urgent measures to stimulate the tourism sector during the upcoming high season and to find new markets.

In addition to these issues, Kriengkrai recommended that once the budget is passed, the government must accelerate spending and introduce supplementary measures to boost the economy.

He also noted the importance of public and private sector collaboration on trade negotiations, particularly in talks with the US to discuss the rules of origin and a proposed increase in the required local content from 40% to 60%.