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General elections and economic backdrop

Thailand is scheduled to hold general elections on 8 February, after Prime Minister and leader of the Bhumjaithai Party, Anutin Charnvirakul, dissolved the 500-member lower house parliament in December 2025. The votes will be cast against a turbulent domestic political landscape since the previous polls in 2023, which saw three different PMs appointed.

The elections in early 2026 are also occurring amidst a fragile cyclical economic backdrop and ongoing structural challenges. We expect cautious investor sentiment, dominated by heightened election uncertainty, to potentially last through 1H26 until government formation and policy direction become clearer. Preliminary election results could be available on the day of the polls, but official results by the Election Commission might take up to 60 days (early April), with government formation occurring within the next few months (possibly around May-June).

A three-way race

The electoral race is increasingly shaping up as a three-way contest between the People’s Party, the Bhumjaithai Party, and the Pheu Thai Party, all of which maintain sizeable support bases. While the share of undecided voters fell to ~8% in an opinion poll in January from more than 30% previously, the contest is set for a fluid finish. With possibility that no single party is on track to secure a parliamentary majority of more than 250 seats, Thailand is poised to have another multi-party coalition government.

Trends during election cycles

We analyse Thailand’s economy and market performances surrounding past elections and compare with the present. We specifically examine the trajectory of growth, fiscal dynamics, inflation, investment flows, and currency performance in the quarters before and after the elections to identify potential cycles.

We evaluate five elections from 2007 in this event study, covering the period just prior to the Global Financial Crisis (GFC) and the gradual recovery following the COVID-19 pandemic. The elections (2007, 2011, 2014, 2019, and 2023) occurred under varying domestic and external conditions. Thailand also experienced military coups in 2014 after the elections (with the constitutional court eventually invalidating the 2014 results), and before 2007. We average the various indicators, and consider the volatility around the data’s average to tease out trends that occurred during election seasons.

Real GDP growth

For the 2026 electoral cycle, economic growth is decelerating, similar to the average trend in the past. However, growth started from a lower rate relative to the past five polls four quarters before the elections. The momentum also eased to the slowest pace two quarters prior to the polls compared to previously. This underscores multiple challenges, such as external tariff headwinds, weak consumer confidence amidst high household debt, and a sluggish foreign tourism recovery. We expect real GDP growth to slow 1.6% in 2026, from slightly above 2% in 2025.

Fiscal dynamics

In the current cycle, fiscal spending accelerated one quarter before the elections in 1Q26, reflecting government efforts to support the weak economy, with the new fiscal year 2026 starting from October 2025. In the event of a political deadlock following the elections, the budget process for FY2027 could be disrupted, significantly hindering fiscal disbursement and spending three to four quarters after the elections. Such a delay was observed following the polls in 2023.

Inflation trends

In the current cycle, Thailand’s headline inflation was at the lower bound of the Bank of Thailand (BOT)’s 1-3% target range four quarters before the elections. Inflation fell further and hovered in negative territory averaging -0.5% yoy, one to three quarters ahead of the polls, marking the lowest readings compared to historical trends. While negative inflation was due to supply-side factors from falling global crude oil prices, ample food supply, and government cost-of-living relief measures, demand-side pressures have also been subdued amid a soft economy.

Investment flows

Net portfolio investment flows: In the latest cycle, net portfolio investments are on very weak footing. Net outflows exceeded those of past electoral cycles, amounting to an average of almost 7% of GDP two to four quarters before the votes. This was reflected in the divergent outcomes between Thai and other financial markets. The Thai equity market underperformed and fell by 10% in 2025, while other global and regional equities posted double-digit gains. Until the domestic political cloud is cleared this year, investor risk appetite is likely to remain subdued.

Net direct investment (DI) flows: In the current cycle, net DI flows look steady and robust compared to past figures, tracking at an average 1.6% of GDP two to four quarters before the elections. Thailand is also benefitting from the wave of interest by foreign companies and direct investors, including from China, in Southeast Asia, as they look to diversify their supply chains. Strong foreign investment applications have been propelled in new areas, such as the digital segment, mostly for data centres, smart electronics, and next-gen automotives, notably electric vehicles (EV). Various political parties are promoting industrial policies targeting new economy sectors, such as artificial intelligence (AI) hardware in data centres, EV, and wellness to drive economic growth. 

Currency performance

The Thai baht’s appreciation against the US dollar in the fourth quarters before the elections in 1Q26 was stronger than the average strength in the past election cycles. This was on the back of broad-based USD weakness, and linkages to gold-related FX flows, despite slowing economic growth and interest rate cuts. Policymakers are increasingly wary about the baht’s strong gains and the negative impact on small and medium-sized exporters and the tourism sector. With increased vigilance over the currency’s strength, policy scrutiny over gold-related activity, and a subdued economy clouded by political uncertainty, the baht is vulnerable toward weakness like historical election trends.

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Chua Han Teng, CFA

Senior Economist - Asean

[email protected]