While Thailand appears to have been successful in suppressing the Covid-19 virus, a report in The Bangkok Post today says the outlook for the country’s economy is far from favorable, calling it the worst in Asia.
The Bank of Thailand predicts that its gross domestic product will shrink by more than 8% this year, which is the bleakest prediction across the main Asian countries’ economies. Such a drop would be even worse than the one experienced during the Asian financial crisis of 1997-1998.
Kiatipong Ariyapruchya, a senior economist for Thailand at the World Bank, says much of it can be attributed to the plunge in international tourism since the country shut its borders in the early weeks of the Covid crisis.
“Thailand has large exposure as a tourism hub, close to 15% of GDP, and it also has a large exposure of the export-oriented sector. Hence the large shock to GDP. “
Meanwhile, Bloomberg is predicting a contraction of 6% for Thailand’s economy, the worst in south-east Asia, with experts expecting it to have a weak recovery of about 4% in 2021. Measures put in place to suppress the spread of the Covid-19 virus. are being seen as a major factor in the economic downturn. The forced shut down of businesses, introduction of a nighttime curfew and state of emergency have had a devastating knock-down effect at a time when investment and consumption were already on a downward trajectory since last year.
With the exception of international flights being resumed, most restrictions have now been lifted, along with the government introducing various stimulus packages to boost domestic tourism and the overall economy. However, no amount of domestic travel can make up for the devastating loss to the country’s tourism sector, which accounted for a fifth of the overall economy last year.
With airports still closed to almost all international arrivals, foreign tourism is expected to plummet to one-fifth of last year’s figures, at just 8 million. The Thai government is still mulling the introduction of travel bubbles with countries it deems safe from Covid-19, but it’s slow going, with the PM expressing concern over the risk of reintroducing the virus through arrivals from abroad.
In addition, analysts do not foresee a rush of investment any time soon, given the bleak predictions facing the country. Exports appear to be recovering, however, having taken a brief hit during the first two months of the year. The rise in the price of gold is providing a much-needed boost, but exports overall are still feeling the effects of a decrease in demand, in addition to disruptions to the global supply chain.
The strong baht is another factor, with the currency gaining nearly 6% against the US dollar over the last 3 months, despite multiple interest rate cuts by the Bank of Thailand. The Central Bank has previously spoken about the negative effect the Thai baht is having on exports and the overall economy, warning that they will take steps to restrain the currency’s climb if necessary.