Strong VAT revenue helps keep Thailand’s FY2026 deficit below forecast at 3.4% of GDP
Thailand could reach its deficit target of 3% of GDP before 2029, Finance Minister Ekniti says, with a fiscal plan review due in November.
- Thailand's fiscal deficit for fiscal year 2026 was 3.4% of GDP, significantly below the earlier forecast of 4.4%.
- The smaller-than-expected deficit is attributed to stronger government revenue, primarily driven by higher-than-targeted Value-Added Tax (VAT) collections due to rising prices.
- As a result of this performance, the government expects to reach its 3% deficit target sooner than the original 2029 plan.
- The finance minister also linked the lower deficit to a stronger bond market and lower government borrowing costs for Thailand.
Thailand’s fiscal deficit for fiscal year 2026 stood at 3.4% of gross domestic product (GDP), below the earlier forecast of 4.4%, Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said, citing the latest Fiscal Policy Office figures.
Ekniti attributed the deficit coming in one percentage point below forecast to stronger-than-expected government revenue, saying the improvement had kept Thailand’s medium-term fiscal plan on track.
Higher prices boost VAT receipts above target
Ekniti identified value-added tax (VAT) as a significant contributor to Thailand’s stronger revenue performance. Because the tax is assessed on the value of purchases, higher goods prices had helped push collections considerably above target, he explained.
Ekniti described the VAT gains as supporting more effective fiscal management and greater fiscal stability. Government revenue overall had exceeded the annual target by a substantial amount, although the exact figures would be released later.
Asked about a possible increase in the VAT rate, Ekniti said the issue was under consideration in Parliament and would have to comply with the principles of fiscal discipline.
Thailand could reach its deficit target before 2029
Ekniti expects Thailand to reduce the deficit to 3% of GDP sooner than the existing medium-term plan envisages. The original timetable allowed three years to reach that target, by fiscal 2029.
Ekniti has ordered a comprehensive review of Thailand’s medium-term fiscal plan using the latest figures. Consideration of the revised plan is expected in November 2026 as part of the regular review cycle.
Ekniti also addressed concerns arising from a warning by the Office of the National Economic and Social Development Council that Thailand’s public debt could exceed the fiscal framework’s limit in 2028. He argued that revenue above target and better-than-expected performance under the medium-term fiscal plan had improved Thailand’s position.
Ekniti links smaller deficit to stronger bond market
“The smaller deficit is good news and has made Thailand’s bond market very strong,” Ekniti said.
“When comparing borrowing costs through 10-year government bonds, the United States is at about 5.2%, France at almost 5%, while Thailand is at only around 2.3–2.4%,” Ekniti said.
Ekniti said the comparison showed that Thailand’s government borrowing costs remained substantially below those of the other countries.
