Thailand’s economic growth is expected to slow in 2026, with gross domestic product projected to expand by only one point six to two point zero percent, according to the Federation of Thai Industries, as mounting domestic and external pressures weigh on manufacturing, employment and purchasing power.

Kriengkrai Thiennukul, chairman of the federation, said the Joint Standing Committee on Commerce, Industry and Banking sees growth easing from an estimated two point zero percent in 2025, reflecting persistent fragility in the industrial sector.

Manufacturing output remains misaligned with export performance, while capacity utilisation in several industries is running below sixty percent, well under normal levels.

He said Thai producers are facing intensifying competition from smuggling, false claims of origin and a surge in low-priced imports, which have eroded competitiveness and forced some firms to cut output or adjust business models.

Small and medium-sized enterprises are under particular strain, grappling with high energy, raw material and wage costs, as well as tighter financing conditions and elevated household debt that continues to limit consumer spending.

External risks are also rising.

The committee expects exports in 2026 could contract by between minus one point five and minus zero point five percent, citing trade wars, policy uncertainty among major partners, stricter trade and environmental rules, and tensions along the Thailand–Cambodia border.

The border situation alone could cost Thailand more than one hundred forty billion baht in cross-border trade.

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

New environmental requirements in key markets, such as the European Union’s carbon and deforestation regulations, are adding to compliance costs, particularly for smaller firms with limited capital and technology.

Despite the headwinds, Kriengkrai said there are encouraging signs from investment in targeted industries, including digital services, electric vehicles, electronics, processed food and clean energy.

Investment promotion applications in the first nine months of 2025 exceeded one point three trillion baht across more than two thousand six hundred projects, including nearly one trillion baht in foreign investment, underscoring confidence in Thailand’s long-term potential.

He urged the government to accelerate economic restructuring under the “Reinvent Thailand” strategy, moving manufacturing up the value chain through technology, innovation, automation and clean energy.

Priority measures include stronger research and development incentives, technology transfer, support for small businesses, expanded use of “Made in Thailand” procurement, stricter enforcement against unfair trade practices, and faster regulatory reform.

Kriengkrai also called for advancing the Bio-Circular-Green model by developing eight targeted bio-based industries, pushing free trade agreement negotiations to diversify markets, upgrading transport, logistics and energy infrastructure, and making water management a national priority.

He stressed that sustained investment in human capital, particularly in science, technology, engineering and mathematics, will be critical to turning 2026 into a year of both resilience and opportunity for Thailand.