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Downside risks loom for Thai economy due to Prolonged COVID-19 Outbreak

The most important issue for the Thai economy at present would be the procurement and distribution of appropriate vaccines adequately and timely.

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The Bank of Thailand (BoT) has revealed that Thailand’s economy faces significant downside risks, because a prolonged COVID-19 outbreak could cause the economy to underperform the baseline projection, squeezing business liquidity and slowing employment.

Minutes from the BoT’s meeting on Wednesday say the recurring outbreaks have increased labor market fragility and recovery will be W-shaped and slower than in the past. The BoT’s Monetary Policy Committee stands ready to use the limited policy space at the most effective time.

At the meeting, the central bank cut its 2021 economic growth forecast to 1.8%, from 3.0%, and its 2022 outlook to 3.9%, from 4.7%.

The minutes also said the committee will ensure that exchange rate movements will not hinder economic recovery.

The impact of the US monetary policy outlook, on domestic long-term government bond and equity prices, will be limited due to low foreign participation in the long-term Thai government bond market and continued underweighting of Thai stocks in recent periods.

Significant downside risks for Thai economy

Looking ahead, the Thai economy faced significant downside risks and uncertainties from
various factors that needed to be closely monitored.

Prolonged outbreak and virus mutations

First, prolonged outbreak and virus mutations from existing and new variants would reduce vaccine efficacy. This could lead to a public health crisis, affect domestic spending, and delay the reopening plan to admit foreign tourists.

Government spending on economic relief and restoration lower than expected

Second, government spending on economic relief and restoration could be lower than expected if projects under the Emergency Decree faced approval delays or low disbursement rates.

New outbreak could exacerbate financial positions of businesses

Third, the new outbreak could exacerbate financial positions of businesses, especially the services sector, leading to widespread business closures and layoffs. Dismissed workers could be unemployed for extended periods and eventually give up finding jobs.

Further deterioration in business and household balance sheets would thus impinge on economic activities and cause a rise in debt defaults. Fourth, the supply disruption and increase in shipping costs would have greater impacts on Thailand’s manufacturing and export sectors than expected.

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Investment

Thailand’s H1 Investment Applications rise 158% in combined value, BOI says

Japanese firms ranked first with 87 projects worth 42.8 billion baht, followed by investments from the U.S. with 18 projects worth 24.1 billion baht, and China with 63 projects worth 18.6 billion baht.

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In the first six months of 2021, Thailand’s investment applications increased 14% from the year earlier period in terms of the number of projects, and 158% in combined value, led by increasing foreign direct investment (FDI) applications, sustained growth in target industries including the electronics and medical sectors, as well as in power generation, the Thailand Board of Investment (BOI) said.

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Business

Large Shopping Malls in Bangkok Will Be Closed until July 25th

Shopping malls under the Mall Group, including all branches of The Mall, the Emporium, Emquartier and Paragon Department Store, are also closed for 14 days, from today, except for supermarkets, food courts, pharmacy shops, eateries (take-out and delivery only), banks, mobile phone shops and vaccination sites.

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BANGKOK (NNT) – Large-scale shopping malls in Bangkok and in some dark-red zone provinces are now closed for two weeks, to comply with the latest COVID-19 curbs in 10 provinces.

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