New coronavirus wave seen derailing Thailand's economic recovery

Economists worry the latest outbreak will hurt retail spending and deal another blow to Thailand's key tourism industry.
Economists worry the latest outbreak will hurt retail spending and deal another blow to Thailand's key tourism industry.PHOTO: AFP

BANGKOK (REUTERS) - A new round of restrictions in Thailand aimed at containing a fresh wave of coronavirus infections will likely derail the economy's nascent recovery from its 2020 slump.

Prime Minister Prayut Chan-o-cha urged the public on Monday (Jan 4) to stay home and avoid travel after the authorities closed a series of venues - from schools to bars - and restricted business hours in Bangkok and some other provinces this month.

Thailand had largely controlled the virus by mid-2020 but a cluster linked to migrant workers in December led to infections in more than half of its provinces.

Economists worry the latest outbreak will hurt retail spending and deal another blow to Thailand's key tourism industry, both central to the government's 1.9 trillion baht (S$83.6 billion) stimulus efforts to reignite growth.

"It's very tough. People don't want to spend," said Ms Chanaporn Fongwichai, a 31-year-old clothes vendor in the city of Udon Thani, adding that sales at her shop have halved since the latest outbreak started.

South-east Asia's second-largest economy suffered its biggest annual slump since the Asian financial crisis in the second quarter of 2020, hard hit by a ban on foreign visitors, while coronavirus curbs also hurt spending and investment.

While the loosening of restrictions gave way to a rebound in the third quarter, analysts worry fresh curbs will bring more pain to an economy expected to have slumped 6 to 7 per cent in 2020 - which would be the biggest contraction in over two decades.

In December, the Bank of Thailand cut its 2021 growth forecast to 3.2 per cent from 3.6 per cent and some analysts have followed suit.

It expects the economy to have slumped 6.6 per cent in 2020.

CIMB Thai Bank last week slashed its 2021 growth forecast to 2.6 per cent from 4.1 per cent, while Tisco Group economist Thammarat Kittisiripat said he would cut his projection for this year to below 3 per cent from 3.4 per cent previously.

"The new wave of Covid-19 is more severe than earlier, which will disrupt the economic recovery this year," he said.

Tourism industry

One key concern is that the outbreak could derail government efforts to revive Thailand's tourism industry, just as the country started to reopen to foreign tourists in October.

Thailand received nearly 40 million foreign visitors in 2019, whose spending accounted for 11.4 per cent of gross domestic product that year. The government expects just five million foreign tourists to visit Thailand this year, down from 6.7 million in 2020.

"Our bookings are below 20 per cent now, compared with 80 to 90 per cent during October-November... There are almost no forward bookings," said Mr Chotchuang Surangkul, associate managing director at N.S Travel and Tours, which runs 20 hotels across the country.

For the business to cope, company employees have had to work four days a week with 20 per cent pay cuts since July, he added.

Thailand's automobile industry, which exports half of the car it produces, is also worried fresh restrictions will hit demand at a time when a strong baht is already hurting overseas sales. The baht gained 10.9 per cent against the dollar since April.

"The most important thing is confidence as people may be worried about their incomes and not want to spend," said Mr Surapong Paisitpattanapong, spokesman of the Federation of Thai Industries' Auto Industry Club.