Thailand throws a lifeline to SMEs for much-needed economic boost

Thai businesses have been lagging behind in innovation compared to its ASEAN peers. In particular, small enterprises have been struggling financially to the point of some closing shop.

Since Thailand’s general election last May 2023, its real GDP growth rate reached its lowest at 1.2 per cent during the third quarter of 2025. Political instability, regional conflicts, and higher global tariffs have contributed greatly to Thailand’s economic slide. Nevertheless, there is still some hope for the economy to improve. Minister of Finance, Ekniti Nitithanprapas, expects the Thai economy to recover in the fourth quarter of 2025.

So far, the government has shelled out THB 44 billion (USD 1.36 billion) as cash handouts to encourage consumer spending. At the same time, the Thai government has its eyes on its small and medium-sized enterprises (SMEs) and is preparing to allocate THB 40 billion (USD 1.24 billion) to ease the burden of struggling SMEs by offering low-interest business loans. This stimulus plan for SMEs is a crucial link in supporting the foundation of the Thai economy, as these businesses contribute more than 35 per cent of the country’s GDP.

Supporting economic growth

Based on the SME Confidence Index conducted by the SME Development Bank of Thailand, optimism regarding economic prospects rose from 67.1 per cent in July-September 2025 to 80.6 per cent for the October-December period. Favourable factors such as the SME stimulus package, an expected increase in sales, and additional investments to support business growth all contribute to this rosy view. In particular, SMEs act as the backbone of Thailand’s economy as they account for more than 3.2 million businesses, or 90 per cent of total domestic firms.

To illustrate, Graph 1 shows SMEs accounted for one-third of Thailand’s GDP in 2023, valued at THB 6.32 trillion (USD 202.3 billion). This comes as no surprise as these small businesses already hold a 30 to 35 per cent share in the value chain since 2019, which justifies the size of the government’s support. By doing so, public officials hope to raise the contribution of Thai SMEs to around 40 per cent of GDP.

However, there are hurdles to overcome. First off, cheap foreign-made goods being dumped in the Thai market are hurting local players. In response, the Thai government is imposing a 10 per cent duty on low-cost goods exports starting 1 January 2026 to protect local businesses. Higher US tariffs present another challenge that hurt SME exports. In 2024, 14 per cent of Thailand’s products were shipped to the US, valued at USD 7.63 billion. With the additional 19 per cent duty, Thai SMEs will experience an overall stunted economic growth due to a reduction in both export value and volume. Minister of Commerce, Suphajee Suthumpun, has confirmed that the country will continue trade talks with the US to reduce the risk to Thai exports, particularly those shipped by SMEs.

Financial hurdles

Another critical problem Thai SMEs face is access to loans. Often, they confront a credit crunch given that their finances are not as established compared to larger companies. Despite majority of Thai businesses being SMEs, the reality is that less than half of these have the privilege of accessing formal credit.

There has been a significant decline in total SME credit granted by big banks over the past three years, as seen in Graph 2. SMEs that focus on wholesale and retail trade as well as motor vehicle are the highest users of bank loans, amounting to THB 976 billion (USD 31.2 billion) in the second quarter of 2025. Meanwhile, small businesses in other sectors such as mining and quarrying, information and communication, and water supply compete to access credit lines worth less than THB 50 billion (USD 1.6 billion).

Prime Minister Anutin Charnvarikul sees the need to support SMEs by providing easier access to credit, relaxing tight regulations, accelerating overall digital transformation, and improving linkages with larger supply chain companies. The Thai government rolled out 12 major initiatives prior to the parliament’s dissolution in December, two of which were aimed at SMEs: a THB 10 billion (USD 310 million) allocation for the Competitiveness Enhancement Fund, and debt resolution for qualified SMEs. With these strategies, it is clear that the government is looking to set up SMEs for success in the global market.

Innovation and incentives

One reason that foreign investors should consider betting on Thailand’s SMEs is the rising adoption of artificial intelligence (AI) solutions. According to the Thailand Development Research Institute, these small businesses need sustainable ecosystems and not just financial assistance. With the One Tambon, One Digital AI Transformation project, the government is targeting to provide AI access to 15,600 businesses and generate THB 500 million (USD 15.57 million) from system upgrades and efficiency gains. Additionally, AI adoption would help SMEs become more competitive in the market, reducing business losses and boosting quality monitoring systems.

To ensure SMEs can keep their lights on, the Thai government has significantly increased tax incentives, offering a 5-year tax exemption capped at 100 per cent of investments towards improving business productivity. This is most helpful for manufacturing firms as they have been struggling with rising costs. With the tax break and financial assistance, there is scope to believe that Thai SMEs can become prominent globally and thus, attractive for foreign investors. Support for small businesses will go a long way in revitalising appetite towards Thailand, and we are optimistic.

This original article has been produced in-house for Lundgreen’s Investor Insights by on-the-ground contributors of the region. The insight provided is informed with accurate data from reliable sources and has gone through various processes to ensure that the information upholds the integrity and values of the Lundgreen’s brand.