Thailand’s budget for the 2027 fiscal year is out, and perhaps the most interesting feature is what it does not do: it barely increases spending at all. Approved expenditures came in at 3,788 billion baht, which is roughly $113 billion. This is a mere 0.2 percent increase compared to 2026, and marks the second year in which spending has been held just slightly above 2025 levels.
As a result of tighter spending, borrowing is expected to fall and the deficit is projected at 3.8 percent of GDP. This is tacit acknowledgement that the government is running out of policy space for prolonged deficits and more borrowing. A period of belt tightening, or at least an end to belt loosening, was not unexpected, and this budget seems to confirm that the time has arrived.
Budget planners in Thailand have been wrestling with the same intractable challenge for a few years now. The economy never fully recovered after the pandemic, remaining stuck in a low-growth equilibrium. With protectionist tendencies on the rise globally, and increasing competition from Vietnam, Thailand has struggled to export its way out of the economic malaise.
To make matters worse, Thailand has high household debt, which makes it difficult for consumers to drive an economic resurgence given constrained purchasing power. The digital wallet program was an ambitious attempt to jump-start the economy through an infusion of cash given directly to consumers, but it was not as effective as hoped for. It was also expensive and placed more pressure on Thailand’s capacity to run deficits and continue accumulating debt. As of March 31, 2026, total public debt was equal to 66.4 percent of GDP.
The 2027 budget suggests the government is now facing up to this reality by freezing spending. The ministries of transportation and agriculture are facing cuts, while police and military spending will hold steady. Capital expenditures are expected to fall. Health, education and social welfare will see small increases, but there are no major new and costly programs on the agenda. Revenue is expected to rise 3 percent. If all goes according to plan, and with spending held steady, this will provide an opportunity to start shoring up the fiscal situation which has been deteriorating since the pandemic.
In 2019, the Thai economy was doing well, which was reflected in its strong fiscal position. The economy was riding a years-long wave of current account surpluses thanks to booming exports. The budget that year forecast a fiscal deficit of 2.7 percent of GDP, but revenue came in higher than expected and actual borrowing ended up being just 2.1 percent.
The pandemic changed Thailand’s economic trajectory and its fiscal reality. In 2020 and 2021, Thailand ran large deficits as it borrowed money to fund stimulus programs and shore up healthcare and social protection systems. Every country in the region did the same. But Thailand tried to get back to business as usual sooner than most, slashing spending by 5.6 percent in 2022. When economic recovery remained weak, the government reversed course and ramped up spending again, including on the digital wallet program.
The fiscal deficit in 2025 shot back up to pandemic-era levels of nearly 5 percent of GDP, and in absolute terms the government borrowed more money in 2025 than it did at the height of the pandemic. Final numbers for the 2026 fiscal year, which ended in September, are not in yet, but preliminary figures indicate revenue has been lower than expected and borrowing higher, placing increased pressure on the deficit.
The 2026 budget was something of a holding pattern, and it seemed likely last year that if things continued as they were, the government would start making cuts. The 2027 budget avoids drastic cuts, but spending is essentially frozen. Among other things, this means less fiscal firepower for the kinds of targeted programs that could actually help get growth back on track.
As long as Thailand’s economy remains sluggish, the government will face fiscal constraints due to weak revenue collection. When it had some policy space following the pandemic, it fumbled over the stimulus and flip-flopped on whether to spend or cut. A lack of policy certainty, compounded by political instability and frequent changes of leadership, has not helped.
In the absence of a quick return to pre-pandemic levels of economic growth, Thailand will likely continue on its current course of fiscal consolidation as it pays down debt, all the while keeping a wary eye on interest rates and hoping they don’t rise. We don’t know what the long-term political and social impacts of this consolidation will be. But the 2027 budget makes it clear that Thailand’s era of belt-tightening has arrived.