Tourism, trade badly hit; biggest drop in GDP since 1998 crisis

BANGKOK • Thailand's economy contracted the most in more than two decades, deepening its recession as the nation's key drivers of trade and tourism remain hobbled by the global coronavirus pandemic.

Gross domestic product shrank 12.2 per cent from a year ago, the National Economic and Social Development Council said yesterday, its biggest decline since the Asian financial crisis in 1998. The figure was not quite as bad as the median estimate of a 13 per cent contraction in a Bloomberg survey of economists.

The outlook for Thailand's economy this year is the most dire in Asia, given its reliance on exports and tourism, both of which have suffered heavy blows amid the Covid-19 outbreak. The pain has been compounded by the strong baht, which gained more than 6 per cent in the April-June quarter, the second-best performing currency in Asia tracked by Bloomberg.

"We are concerned about the economy, especially employment, bad debts" and small and medium-sized enterprises, said Dr Thosaporn Sirisumphand, secretary-general of the economic council. "We will try to take care of 16 million workers in the informal sector. We have prepared measures to help them."

The council cut its full-year forecast to a 7.3 per cent to 7.8 per cent contraction, from an earlier estimate of a 5 per cent to 6 per cent fall. That is still better than the 8.1 per cent fall seen by the central bank and the 8.5 per cent decline the Finance Ministry expects.

OCBC Bank economist Howie Lee said: "The worst is likely over, but there is still no reason to pop the champagne yet. From here, we expect the pace of economic recovery to be gradual, with many challenges still facing the Thai economy."

The baht was little changed at 31.131 per dollar after the data. The benchmark stock index was steady, paring earlier gains of as much as 0.4 per cent.

Yesterday's data reflects the fact that the economy was shut for part of the second quarter and borders remain closed to most foreigners. The government has gradually eased restrictions on domestic movement since May, and almost all businesses can now open.

The government, which has announced US$60 billion (S$82 billion) in stimulus, is also in the midst of changing its economic team. New Finance Minister Predee Daochai will need to work with Dr Sethaput Suthiwart-Narueput, who will take over as central bank governor on Oct 1, to coordinate fiscal and monetary policy.

Anti-government protests, mainly by young people, are starting to gain momentum and add to the uncertainty. More than 10,000 people rallied in Bangkok on Sunday, one of the biggest gatherings yet, as protesters demand an end to the military-led administration and call for the monarchy's powers to be reined in.

Mr Lee said: "Notwithstanding the expected prolonged slump in tourism, the recent unrest in Thailand may also dampen investor sentiment, in addition to the already-fragile consumption trend."

BLOOMBERG