Asoke junction along Sukhumvit Road, usually jammed with traffic, is dead as people work from home during the lockdown. (Photo: Varuth Hirunyatheb)
Thailand will likely be the worst economic performer in Southeast Asia this year, with economists continuing to slash the country’s growth forecast amid surging Covid-19 infections, mounting political tensions and fading hopes for a tourism revival, according to Bloomberg.
The Fiscal Policy Office (FPO) downgraded the country’s 2021 economic forecast to 1.3% GDP growth, a dip from an April projection of 2.3%, on the assumption new infections of Covid-19 will peak in the middle of August, said director-general Kulaya Tantitemit.
However, the FPO expects the situation to improve in 2022 as the business sector gradually returns to normalcy, leading to economic expansion of 4-5%.
The FPO forecasts 12 million foreign tourist arrivals next year.
The office also upgraded its export growth outlook for this year to 16.6%, up from 11% earlier in the year, because of the recovering global economy and rebounding global trade.
The FPO projected government consumption to expand by 4.2% this year, with state investment at 9.5%. Private consumption is expected to expand 1% per year and private investment 4.1%.
With new Covid infections and deaths continually setting records since the latest surge began in April, some economists are flagging the possibility of a technical recession in the second half of the year — or even a second straight annual contraction, something the country hasn’t seen since the Asian financial crisis more than two decades ago.
According to the latest weighted average of 36 economists surveyed by Bloomberg, GDP should grow 1.8% this year. That is weak considering it’s a year-on-year comparison and in 2020 the Thai economy contracted 6.1%, the most in two decades.
“We see Thailand as a laggard in the region, pencilling in the lowest GDP growth forecasts in Asean for both 2021 and 2022,” said Charnon Boonnuch, an economist at Nomura Holdings Inc in Singapore. “Our forecast implies economic output will not return to pre-Covid levels before the third quarter of 2022, the slowest in Asean, reflecting the high dependence on foreign tourists.”
Bangkok and 12 other provinces, which account for more than half of the Thai economy, have been under lockdown and curfew since last week as the Delta variant threatens to overwhelm the country’s health system. The Bank of Thailand said the outbreak could shave as much as two percentage points off this year’s GDP if current measures fail to quell it and the pandemic endures for the rest of the year.
Thailand reported 17,669 new infections and 165 deaths on Thursday. Total cases rose to 561,030, of which 95% have come since the latest wave began in April, official data show. The Public Health Ministry expects the current wave to begin easing by October.
Thailand has administered about 16 million vaccine doses, enough to cover about 11% of the population, according to the Bloomberg Covid-19 Vaccine Tracker. The central bank, which previously expected the country to achieve herd immunity in the first half of next year, now says that milestone won’t be reached until after 2022.
“There’s now increasing chatter the Thai economy will contract again this year,” said Maria Lapiz, managing director of Maybank Kim Eng Securities Thailand. “There’s no reason for optimism.”
The economic and health crises coincide with political unrest. The pro-democracy movement has returned to the streets in Bangkok after a six-month lull, with gatherings organised by different groups since June 24.
“We are in a severe crisis and our health system is on the brink of collapse,” said Burin Adulwattana, chief economist at Bangkok Bank Plc. “The compensation programme is inadequate. More people are losing faith in the government, which has led some of them to take to the streets. This can undermine the government’s stability and further damage confidence.”
Prime Minister Prayut Chan-o-cha aims to allow more foreign arrivals from October, but infections are rising in Phuket, the first destination in the country to reopen to vaccinated tourists without a quarantine back on July 1. The outbreak could threaten the goal of rescuing the tourism industry, which contributed one-fifth of Thailand’s economy before the pandemic and employed 20% of its workforce.
The economy’s two remaining engines — government spending and exports — also face uncertainties. June exports rose 43.8% year-on-year, the fastest pace in 11 years, in line with recovering global demand. Yet shipments could be at risk if vaccination remains slow, an industry group warned.
“It’s hard to hang on to the hope the country will reopen in October,” said Ms Lapiz. “If the reopening happens, will it make a big difference?”