The recurring waves of the COVID-19 pandemic in various countries, including Thailand, will directly slow the pace of Thailand’s economic recovery in 2021. As such, EIC revises Thailand’s GDP forecast to 2.2% for the reasons following:
The recovery in foreign tourist arrivals is expected to be slower than expected. Although citizens of various countries are receiving COVID-19 vaccines and Thailand may allow vaccinated people to travel to the country with more relaxed quarantine limitations, the resumption of international travel is expected to accelerate once immunity collective will be widely established in many countries of origin. EIC believes that advanced economies should gradually form collective immunity during Q2 / 2021 to Q3 / 2021.
Meanwhile, developing countries in Asia, Thailand’s main source of tourists, are expected to develop herd immunity, from Q4 / 2021 (like China) through Q4 / 2022 (like CLMV), a period slower than expected. As such, EIC is revising the number of international tourist arrivals in 2021 to 3.7 million people, with a recovery expected in H2 / 2021, particularly in Q4 / 2021.
Export conditions are expected to be weaker than expected in the first half of 2021 due to the period of global economic downturn induced by COVID-19, headwinds linked to the container shortage and the strengthening of the baht. However, factors that are expected to accelerate the global economic recovery and export growth during H2 / 2021 include significant stimulus packages released in various countries, more targeted city closures, and accelerated vaccinations that will lead to settlements. collective immunity, especially in advanced economies. EIC expects exports to improve 4.0% year-on-year in 2021.
Regarding domestic demand, high-frequency data indicated that the new wave epidemic has moderated economic activities, especially those requiring face-to-face interactions. EIC estimates that the recurrent outbreak could be largely contained within 2 months. Even though the consequences of the second wave might not be as damaging as the first due to more targeted lockdowns with the support of government stimulus packages, the economic scars will be further exacerbated and will particularly affect the SME sector and employees of the economy. already vulnerable service sector.
The overall pace of Thailand’s economic recovery is expected to progress slowly, as the tourism sector, the main engine of economic growth and employment in Thailand, has yet to recover. Thus, the economic recovery will be uneven between the different sectors of activity. In addition, various uncertainties and downside risks persist.
Risk factors that justify surveillance in 2021 include 1) the length of time it takes to successfully contain the second wave epidemic, 2) potential delays in widespread vaccine distribution in Thailand, 3) economic scars that could deteriorate financial stability by increasing bad debts 4) political instability in Thailand which could weaken investor confidence, 5) drought as water stored in large dams approached below the historical average, and 6) Stronger appreciation of the baht against trading partners and competitors, which could slow the recovery of exports and demands for international travel.
Author: Center for Economic Intelligence (EIC)