In recent years, readers following economic news have become increasingly familiar with the term "K-shaped economy" or "K-shaped recovery," which has become a popular concept in economics. This article will decode the meaning of the letter K across various dimensions of the Thai economy.
When observing an economic recovery, people often imagine economic charts shifting from a sharp decline to a rapid rebound (V-shaped) or a gradual improvement (U-shaped). This implies that when the economy worsens, everyone suffers, but when it recovers, everyone improves together. However, a K-shaped recovery is different. The vertical line of the K represents the starting point before the crisis (for example, when COVID-19 began to spread rapidly). Subsequently, the graph splits into two paths, resembling the arms and legs of the letter K: the upper arm represents groups of people or businesses that recover and grow well, while the lower arm represents those still facing problems, declining incomes, or slower recovery than others.
A K-shaped recovery does not simply mean the economy is bad or good; rather, it indicates increasing divergence between beneficiaries and those disadvantaged. The concern with a K-shaped economy is the widening gap between these two lines: over time, those on the upper line soar higher, while those on the lower line fall deeper, resulting in more pronounced inequality.
Economists commonly use the term K-shaped to explain the Thai economy because it answers the puzzle many have wondered about: why do ordinary people feel the economy is worsening even while overall GDP figures continue to grow? From SCB EIC's perspective, Thailand's economy is projected to grow by 2.2% in 2026 and 2.1% in 2027, representing a slowdown from 2.4% in 2025. This slowdown partly results from temporary factors such as the war in the Middle East and structural problems like scars from the COVID crisis, an aging society, lack of innovation, and climate change.
However, under the overall growth trend of just over 2%, some sectors are expected to expand strongly, including goods exports and investment, which are projected to grow by 16% and 9%, respectively, this year and continue growing next year. In contrast, private consumption is expected to grow only 2.6% this year, despite stimulus of about 200 billion baht from the "Thai Chai Thai Plus" program and government welfare card top-ups. This support is still insufficient to lift the lower arm's trajectory significantly, with growth slowing further to 1.6% next year due to a higher base.
Examining details reveals that this economic recovery in Thailand is a K-shaped recovery layered over another K-shaped pattern, spanning business sectors, company sizes, households, and the labor market.
Data from the Department of Business Development shows that the largest 1% of businesses in the country have seen continuously increasing revenues. In 2025, their revenue was 30% higher than pre-COVID levels in 2019, whereas SMEs' revenues remain 3.4% below pre-crisis levels. Additionally, the proportion of SMEs classified as zombie firms—companies whose operating profits are insufficient to cover interest payments for over three consecutive years—is as high as 12.3%, nearly three times the rate among large firms.
Figure 1: K-shaped recovery of the Thai economy across multiple dimensions.
The crucial question is how to enable people and businesses still in the "lower arm of the K-shaped economy" to rise and benefit more from economic growth. SCB EIC believes Thailand must accelerate broad-based and sustainable growth by ensuring that gains from thriving businesses and industries are more widely shared among people and enterprises.
Key approaches include three areas: (1) upgrading the country's new growth engines by leveraging foreign direct investment (FDI) to increase domestic economic value and enhancing workforce skills to meet new economic demands; (2) linking benefits to the broader economy by fostering connections between FDI and large companies with Thai SMEs; and (3) assisting vulnerable groups during the transition, especially those with potential to adapt and grow in the future.
In other words, Thailand must emphasize quality of growth alongside traditional quantity of growth. Ultimately, good economic growth is not just about faster expansion figures but about creating opportunities and improving the living standards of the majority so that everyone can move forward together—avoiding leaving anyone behind at the lower tail of the K.
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