Fiscal decline expected to pressure Thailand over the medium term

In 2026, the incoming government is likely to face a host of internal and external challenges, with Thailand's fiscal position a longstanding problem that has become more strained amid sluggish economic growth.

- WICHIT CHANTANUSORNSIRI

This mounting pressure already prompted Moody's and Fitch Ratings to revise the country's outlook from stable to negative.

Aside from the current government's efforts to inject stimulus to prevent the economy from stalling and to lift GDP, policymakers want to increase government revenue through tax reform to ensure the state interest burden relative to net revenue does not rise to a level that affects the country's sovereign rating.

Over the past two decades, successive administrations have implemented populist policies that significantly increased welfare spending, leading to higher public debt and a rising interest burden.

In 2024, the ratio of interest payments to government revenue was 9.59%, rising to 10.2% in 2025.

REVENUE CONCERNS

A Finance Ministry source who requested anonymity said the ratio of government revenue to GDP has been steadily declining — from 17% in 1993 to 14.9% in 2025.

As revenue declines, government expenditure has only become more crucial in stimulating the economy, especially during periods of stagnation, rising borrowing costs, and high household debt. This trend is reflected in the rising ratio of government spending to GDP.

The Finance Ministry plans to adopt a data lake system to improve tax collection efficiency and broaden the revenue base, aiming to raise the value-added tax (VAT) rate to 8.5% in 2028 and 10% in 2030, up from the current 7%.