Leading Thai economists are cautioning that ongoing political instability, which could trigger a House dissolution, risks derailing government spending and key stimulus measures.
Analysts argue that a new government, especially if short-lived, would struggle to roll out critical policies, creating a period of “policy paralysis”.
A premature dissolution before full economic recovery could dent investor confidence and place pressure on Thailand’s capital market.
Some experts, however, say the damage may be contained since the 2026 budget has already been approved by parliament.
Amornthep Chawla, executive vice president and head of Research at CIMB Thai Bank, said the political outlook is becoming clearer, with focus now on forming a new administration and choosing the next prime minister.
For investors and the private sector, he stressed, stability and clarity are essential. A swift appointment of a government would reduce uncertainty and establish a clear economic direction.
Amornthep warned that the new government faces a “very difficult” challenge, as recent data points to slowing consumption, weaker investment, softer tourism, and falling trade.
He said businesses urgently need concrete policies that restore confidence and deliver quick results.
Any delays in forming the next government could disrupt the 2026 budget and potentially trigger a credit rating downgrade.
“The challenge is immense because we have no time to wait. The new government will have no time for a honeymoon period; they will have to hit the ground running,” Amornthep said. “Otherwise, the economy risks stumbling further, and we will fall behind other countries.”
Analysts also flagged the risk of political fragility. A slim majority could complicate the passage of key laws, including the budget bill.
Pipat Luengnaruemitchai, chief economist at Kiatnakin Phatra Financial Group (KKP), said the political shake-up brings both positives and negatives. While some short-term uncertainty is resolved, long-term instability has worsened.
He noted this is the fourth time in 20 years that a prime minister has been removed by a court, exposing deep structural flaws.
Even with a new administration, Pipat warned it could prove short-lived, limiting its ability to implement meaningful reforms.
“I believe the change of prime minister at this time may not alter the economic outlook, because no matter who becomes prime minister, the new government will likely be in a weak position,” he said.
A drawn-out government formation could also stall budget disbursement, a challenge Thailand faced in 2023.
Paiboon Nalinthrangkul, CEO of Tisco Securities and President of the Investment Analysts Association (IAA), said the ruling against former prime minister Paetongtarn was “not unexpected,” leading to a “limited downside” for Thai equities as the outcome had already been priced in.
He added that investors are now awaiting the prime minister’s selection, warning that further delays could fuel market volatility.
Paiboon said a House dissolution and new election need not be negative if the economy is strong. But with inflation and exports under strain, he cautioned that a rushed dissolution could erode confidence.
Sorrabhol Virametheekul, senior director of Securities Analysis at Kasikorn Securities, said the market is watching closely for a new prime minister and cabinet formation.
He expects a government to be installed within 30 days. Following the August 29 verdict, he noted the stock index was flat, though the baht weakened by 2–3%.
Sorrabhol said downside risks are limited because the 2026 budget has been secured. He expects short-term volatility in September but pointed to positives such as the budget and strong corporate earnings.
He urged investors to see dips as buying opportunities, recommending bank stocks for dividends and ICT stocks, which have dropped to attractive levels with high growth potential.
He also highlighted that a possible US Federal Reserve rate cut in 2026, which could weaken the dollar, may drive fresh fund flows into Asian equities, including Thailand, helping offset domestic risks.
