Political Uncertainty and Economic Challenges in Thailand
The political landscape in southern Thailand has been significantly impacted by a massive flood that occurred last week. This event has added another layer of complexity to the already delicate situation, as Prime Minister Anutin Charnvirakul signals an early dissolution of parliament, potentially earlier than the previously announced late January 2026. This move comes under pressure from the opposition for a no-confidence vote against the minority government.
While the business sector remains largely indifferent to the prospect of an early dissolution, many are concerned about potential delays in forming a new government. These delays could affect the disbursement of next year’s budget, leading to uncertainty in economic planning.
Some executives have urged the government to fast-track economic stimulus measures before leaving office. This approach is seen as a way to provide insurance against a political vacuum while the nation awaits a new cabinet. The floods have introduced significant political risk, which could shape economic recovery policies, investor confidence, and even the survival of the current administration.
No Easy Task
Kiatanantha Lounkaew, a lecturer in economics at Thammasat University, highlighted the political shockwaves caused by the deadly flooding in Hat Yai. Extending the timeline for dissolving the House could lead to more political wounds being reopened. If Mr. Anutin hopes to return for another term, he must present an economic package that restores public confidence and ensure it is managed by qualified professionals.
Dissolving the House before next year would limit the government’s ability to fully drive policy as it would be a caretaker administration. However, delaying the dissolution could also be damaging, exposing the government to further criticism as its response to the Hat Yai floods has damaged its appeal.
Mr. Kiatanantha pointed out that while stimulus schemes such as “Khon La Khrueng Plus” co-payment programme enhanced the government’s political standing, they have not delivered clear economic results. The southern floods, while affecting only a few provinces, have dampened national spending sentiment and overshadowed the government’s broader policy agenda.
Quickener Stimulus
Poonyawat Sreesing, senior economist at the Economic Intelligence Center (EIC) of Siam Commercial Bank, noted that an early parliament dissolution is unlikely to have a significant impact on GDP growth this year and next, unless the formation of a new government is delayed similar to the general election in 2023.
The Move Forward Party won the poll in May that year, but was blocked by military-appointed lawmakers from forming a government, leaving the door open for second-place Pheu Thai Party, which eventually formed a coalition government. Former businessman Srettha Thavisin was named the country’s 30th prime minister on Aug 22, 2023.
The long pause in forming a government delayed parliamentary approval of the 2024 fiscal budget until March 2024, meaning the government had a limited budget to revive the subdued Thai economy.
Continued Support
Noppong Teeravorn, president of the Federation of Thai SME Association, believes the government can still continue to implement assistance measures for those facing hardships, regardless of whether parliament is dissolved in December or January. However, if the formation of a new government is prolonged, it would undermine public confidence in the economy, suppress consumer spending, and hold back domestic investment.
When politics comes before economics, people lose confidence. They worry, they hold back on spending, and the private sector becomes reluctant to invest. He supports a second phase of the government’s co-payment scheme because it has effectively stimulated domestic spending, particularly benefiting small and medium-sized enterprises (SMEs).
Election-Driven Policies
The government is pushing for policies broadly beneficial to the public, with an agenda aiming to gain advantages in the next general election. This direction can be clearly seen, no matter when the Anutin government is dissolved.
In addition to the second phase of the co-payment scheme in December, the government needs to address rehabilitating households and businesses in flood-ravaged Hat Yai and neighboring provinces in the South. These measures are important because they influence the votes politicians will receive and the outcome of a new election.
Easing Mortgage Approvals
Tritecha Tangmatitham, managing director of Supalai Plc, said a dissolution would not significantly affect the economy or the housing market, as political shifts generally have minimal influence unless they involve severe disruptions such as protests or flooding. What the market needs most is stronger confidence and clearer economic momentum.
Additional property incentives might not be introduced, as many measures have already been implemented and reached their practical limits. If new property stimulus is introduced, the government should promote it prominently, similar to the co-payment scheme, as many potential buyers remain unaware of existing programmes.
Expedite Trade Tasks
Dhanakorn Kasetrsuwan, chairman of the Thai National Shippers’ Council (TNSC), said if parliament is dissolved in mid-December, exporters do not expect a severe short-term impact on the economy as the bureaucracy and international trade mechanisms will continue to function. However, several indirect impacts should be monitored.
One concern is possible delays to important economic policies and laws, particularly those under review. Delays might shake confidence and hinder investment in 2026. A caretaker government period may create uncertainty about trade and export policies, such as free trade agreements, export promotion, and logistics risk management, potentially leading to a “policy freeze” that impacts strategic decisions.
To prevent a policy vacuum under a caretaker government, TNSC urged the current government to expedite key tasks before the dissolution. Priorities include finalising essential trade and export laws to reduce risks for exporters, particularly regarding logistics cost-reduction measures, customs procedures and import-export regulations.
