FTI warns of ‘perfect storm’ as 2026 GDP growth seen at 1.6–2.0%

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) expects Thailand’s economy to expand by only 1.6–2.0% in 2026, slowing from an estimated 2.0% in 2025.

He said the outlook reflects intensifying pressure on manufacturing, employment and domestic purchasing power. In particular, the industrial sector remains fragile, with the Manufacturing Production Index (MPI) still not aligned with export growth.

Key risks include smuggling, false claims of origin (transshipment), and a surge in low-priced imports, which have eroded Thai producers’ competitiveness and forced some to cut output or adjust business models.

Data from the Office of Industrial Economics shows several industries running capacity utilisation below 60%, well under the normal 70–80% range, underscoring broader weakness across Thai manufacturing.

SMEs, meanwhile, continue to face cost pressures from energy, raw materials, wages and financing, while high household debt is limiting the recovery in purchasing power. As a result, SME revenues are rebounding more slowly than those of large businesses.

On the external front, JSCCIB expects exports in 2026 could contract by between -1.5% and -0.5%, citing the impact of trade wars, policy uncertainty among major trading partners, tighter trade and environmental barriers, and Thailand–Cambodia border tensions. 

The committee warned the border situation could cost Thailand more than 140 billion baht in cross-border trade.

Structural constraints are also weighing on competitiveness, including reliance on low value-added exports and a baht that is expected to strengthen and remain volatile. 

Environmental rules in key markets, such as the EU’s Carbon Border Adjustment Mechanism (CBAM) and the EU Deforestation Regulation (EUDR), are adding to business costs—especially for SMEs with limited capital, technology and personnel.

Despite the headwinds, he said 2026 still offers positive signs from investment in targeted industries, including digital, electric vehicles, electronics, processed food and clean energy. 

This is reflected in investment promotion applications in the first nine months of 2025, valued at more than 1.3 trillion baht across over 2,600 projects, including more than 980 billion baht in foreign investment—seen as a vote of confidence in Thailand’s potential.

Kriengkrai said Thailand must accelerate economic restructuring under the “Reinvent Thailand” concept, upgrading manufacturing from original equipment manufacturing (OEM) to higher value-added industries, while promoting technology, innovation, automation and clean energy to boost productivity, reduce long-term costs and strengthen competitiveness.

He urged the government to fast-track support measures, including R&D incentives, technology transfer, SME development, and increasing “Made in Thailand” (MiT) procurement to at least 30% of public sector purchasing budgets. 

He also called for stricter enforcement of trade measures to protect Thai operators from unfair competition.

In addition, he said Thailand should push ahead with regulatory reform, tackle corruption in concrete ways, and accelerate the BCG (Bio-Circular-Green) model by developing eight targeted bio-based industries:

• Bioplastics
• Biofuel
• Biochemical
• Bio-pharma
• Functional food and novel foods
• Biofabrics
• Cosmetics
• Biofertiliser

He added that Thailand should step up FTA negotiations to diversify export markets, invest in transport, logistics, energy infrastructure, and elevate water management to a national priority.

Human capital development, he said, is also critical, with an urgent need to upskill, reskill and develop new skills aligned with future industries—particularly in science, technology, engineering and mathematics (STEM)—through collaboration between government, industry and educational institutions.

He said 2026 will be both a year of challenge and opportunity, requiring Thailand to strengthen itself under the CRS framework:

• Competitiveness: Enhancing competitiveness through innovation, technology, international standards and workforce development.
   
• Resilience: Building resilience through supply chain risk diversification, economic restructuring and mechanisms to absorb volatility.
   
• Sustainability: Driving sustainable growth under ESG, the circular economy and clean energy, with a goal of net zero by 2050, while uniting all sectors under the “ONE Thailand” concept to turn global pressures into opportunities for stronger, more sustainable long-term growth.