BANGKOK • Thailand's economy contracted at its sharpest pace in eight years in the first quarter, pushing South-east Asia's second-largest economy into recession sooner than expected, as the coronavirus pandemic hit tourism and domestic activity.
The state planning agency, reporting January-to-March data yesterday, slashed its forecast for this year's gross domestic product (GDP) to a contraction of 5 per cent to 6 per cent from a growth of 1.5 per cent to 2.5 per cent that had been projected in February.
That would be the worst decline since 1998 when the Asian financial crisis damaged the economy.
The economy shrank 1.8 per cent in the first quarter from a year earlier, the deepest contraction since the fourth quarter of 2011, when there was bad flooding.
That was better than a 4 per cent contraction estimated in a Reuters poll, and compared with the downwardly revised 1.5 per cent growth in the final quarter of last year.
"The outbreak impact in Q2 will be much bigger than in Q1," said Mr Phacharaphot Nuntramas, an economist at Krung Thai Bank, who predicts the economy will shrink 8.8 per cent this year.
The impact of the lockdown, while having eased somewhat, will continue to affect household spending and private investment for the rest of the year, he added.
On a quarterly basis, the economy shrank a seasonally adjusted 2.2 per cent, also the worst decline since 2011, but less than the poll's estimate of a 4.5 per cent decline.
The agency revised the October-to-December quarterly GDP to a 0.2 per cent contraction from 0.2 per cent growth, meaning the economy slipped into a technical recession.
The economy will be hit the hardest in the second quarter by the lockdown, Mr Thosaporn Sirisumphand, head of the National Economic and Social Development Council, told a news briefing.
"There should be a U-shaped recovery," he said, adding that foreign tourists may be allowed to return in the third or fourth quarter.
Thailand on Sunday reopened malls and department stores for the first time since March in its second phase of relaxing measures as the number of new virus cases slowed.
The government has extended a ban on passenger flights until end-June to try to curb the spread of the virus, which has infected more than four million globally and 3,031 in Thailand.
The agency cut its projection for this year's exports and foreign tourist numbers, the main drivers of Thai growth.
It now expects exports to fall 8 per cent this year rather than rise 1.4 per cent, and slashed its forecast for foreign tourist numbers this year to 12.7 million, down from the earlier 37 million, and last year's record 39.8 million.
However, the government's one trillion baht (S$44.5 billion) borrowing will help, Mr Thosaporn said, referring to the latest step to mitigate the impact of the outbreak.
Most economists expect the central bank to cut its key interest rate further from a record low of 0.75 per cent this week.
"With the outlook for near-term growth and the recovery very poor, the Bank of Thailand is set to ease policy further on Wednesday. We have pencilled in a 25 bps (basis points) cut, to a record-low 0.5 per cent," Capital Economics said in a note.
"Overall, we think the economy will shrink by 9 per cent this year, which would be worse than even during the Asian financial crisis."
In the first quarter, foreign tourist numbers tumbled 38 per cent from a year earlier, while private investment fell 5.5 per cent and public investment dropped 9.3 per cent. Private consumption rose at a slower pace of 3 per cent.
REUTERS
