What: Thailand's retail sector faces significant disruption as border conflict with Cambodia threatens THB500 million in daily trade and compounds existing tourism challenges.

Why it is important: This crisis highlights the vulnerability of Southeast Asian retail markets to geopolitical tensions, particularly as Thailand struggles to revive its crucial Chinese tourism market while managing regional conflicts.

Thailand's retail sector confronts a complex crisis as border tensions with Cambodia disrupt vital trade routes and tourism flows. The conflict over ancient temples, including Prasat Ta Muen Thom and Preah Vihear, threatens THB500 million in daily cross-border commerce, affecting essential supply chains for consumer goods, apparel production, and electronics components. The situation compounds Thailand's existing tourism challenges, with international arrivals already down 5% in the first half of the year. Chinese tourism, traditionally a crucial market, has been particularly affected, with projected visitors revised down from 6.9 million to 5 million. While Malaysia has overtaken China as the top source of international tourists, their lower spending power presents a significant concern for retailers. The government's ambitious target of generating 3.5 trillion baht in tourism spending this year appears increasingly challenging, impacting retailers across major tourist destinations like Bangkok, Pattaya, and Phuket, where tourism accounts for 18% of retail merchandise spending and 23% of food and beverage revenue.

IADS Notes: The current border conflict's impact on Thailand's retail sector occurs against a backdrop of significant industry transformation throughout 2024-2025. While June 2025 data showed the retail sector contributing THB2.8 trillion to GDP, with tourism accounting for 18%, the industry faces multiple challenges. Despite this, major retailers remain optimistic, as evidenced by Central Group's October 2024 announcement of a $461 million investment in tourist destinations like Krabi and Chiang Mai. This confidence is supported by projections from November 2024 showing Thailand's luxury market growing to $3.6 billion by 2029. However, March 2025 reports revealed mixed results for major retailers like Central Retail, with declining same-store sales despite continued expansion. The current crisis adds another layer of complexity to Thailand's retail recovery, particularly concerning Chinese tourism, which was already showing signs of weakness before the conflict. This situation highlights the delicate balance between Thailand's ambitious retail development plans and its vulnerability to regional geopolitical tensions.

What Thailand’s latest crisis means for retailers and tourism recovery