Thailand’s economy is expected to be impacted severely by the COVID-19 pandemic, shrinking by at least 5 percent in 2020 and taking more than two years to return to pre-COVID-19 GDP output levels, according to the World Bank’s latest Thailand Economic Monitor, released yesterday.
An estimated 8.3 million workers will lose employment or income by the COVID-19 crisis, which has put many jobs, in particularly those related to tourism and services, at risk.
9.7 million economically insecure people
The report finds that the number of economically insecure, or those living below USD 5.5 per day (in purchasing power terms), is projected to double from 4.7 million people in the first quarter to 9.7 million people in the second quarter of 2020.
In particular, the share of economically insecure middle-class households with workers in the manufacturing and services sector will rise by three-fold, from 6 percent to 20 percent.
“As the recovery phase begins, a key challenge will be how to help people who lost their jobs reconnect with the labor market. Active labor market measures, such as wage-subsidies targeted to individuals in the most vulnerable sectors, and for on-the-job training to promote reemployment should be explored.”Birgit Hansl, World Bank Country Manager for Thailand
Severe economic impact
While Thailand has been successful in stemming the tide of COVID-19 infections over the last three months, the economic impact has been severe. The tourism sector, which makes up close to 15 percent of Thailand’s GDP, has been hit hard, with a near cessation of international tourist arrivals since March 2020.
Exports are expected to decline by 6.3 percent in 2020, the sharpest quarterly contraction in five years, as demand for Thai goods abroad remains weakened by the global slowdown. Household consumption is projected to decline by 3.2 percent as movement restrictions and dwindling incomes limit consumer spending, especially in the second quarter of 2020.
Return to prior growth by 2022
As Thailand starts to ease mobility restrictions, domestic consumption, Thailand’s traditionally strongest driver of growth, may pick up in the second half of 2020 and in 2021, but economic recovery will be gradual and uncertain.
In the baseline, the Thai economy is projected to grow by 4.1 percent in 2021 and by 3.6 percent in 2022, which represents a slow recovery to pre-COVID GDP output levels by mid-2022. The shape of the recovery is subject to considerable downside risks, including weaker global growth, feeble tourism, and continuing trade and supply chain disruptions.
Last week the Bank of Thailand sharply downgraded its forecast of Thailand’s full-year economic outlook to a 8.1% contraction, instead of 5.3% previously forecasted.
The central bank, however, raised its forecast for Thai economic growth next year to 5% from the 3% predicted in March.