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At first glance, it appears as though the Southeast Asian country of Thailand has not been too adversely affected by the coronavirus pandemic. As of July 28th, just 3,297 cases had been reported in Thailand, resulting in a total of 58 deaths.
However, this observation ignores the socio-economic impact of Covid-19, which has decimated Thailand’s lucrative and fast-growing tourism sector.
While the Governor for the Bank of Thailand (BoT) may have recently ruled out the option of a bailout from the International Monetary Fund (based on the relative strength of the Thai economy), there’s no doubt that the nation’s tourism market will take a while to recover and extend the path towards economic growth well into 2021.
But just how long is the path towards Thailand’s economic recovery, and what does the future hold for this emerging Asian nation?
How Reliant is the Thai Economy on Tourism?
Make no mistake; the tourism sector comprises a significant part of the Thai economy, providing an estimated one in six job opportunities nationwide.
It also accounts for a whopping 13-14% of the country’s economy, receiving more than 3.5 million international visitors in January of this year alone.
However, China accounts for almost 30% of the tourists who visit Thailand on average, and the closure of international borders during the first two quarters have had a huge impact on the Thai economy and its capacity for generating revenues.
As a result of this, the overall growth forecast in Thailand has been slashed from an initial projection of 2.7% to a 8.1% negative growth.
This has been lowered to a potential range of between 1.5% and 2.5% by the National Economic and Social Development Council, compounding the fact that GDP growth of 2.4% in 2019 represented the slowest pace in five years.
How is Thailand Monitoring its Economy?
Thailand is currently monitoring its initial economic recovery in a number of different ways, particularly with the tourism sector likely to grow slowly and incrementally in the near-term.
One measure is the Thailand Economic Monitor for June 2020, which highlighted an economic contraction of 5% in Q2 and a decline in global demand and trade (which impacted noticeably on Thai exports and supply chains).
The government has also observed a weakening demand and falling energy prices, triggering a sharp fall in inflation within a relatively short period of time.
Beyond this, the Thai government has also turned to satellite images to gain faster and real-time updates on the nation’s economy.
This process involves reviewing detailed images from outer space, which focus on nitrogen dioxide concentration in specific areas and the level of visible night during the evening. These signs are indicative of economic activity and output, and various officials have confirmed that they can already see the green shoots of recovery in Thailand.
While this type of cutting-edge technology certainly offers a true and accurate insight into real-time economic activity, the findings suggest that Thailand may be performing slightly better than some would expect in the current climate.
Thailand’s path to recovery and courses of action
At present, the Thai authorities are continuing to manipulate and stimulate the economy to achieve optimal growth levels, before activity levels return to pre-Covid-19 levels towards the end of 2021.
However, the country isn’t expected to extend its record-low base interest rate policy below 0.50%, highlighting a balanced economic approach and reinforcing the real-time value of the Thai baht.
In order to offset the reported 80% decline in foreign tourist numbers into Thailand, the government may also want to follow Vietnam’s approach by prioritising and promoting domestic tourism.
This would require sustained infrastructure spending in public transportation and holiday resorts, while the government may also need to prioritise job retention schemes for hotel staff nationwide.
Such measures should help the economy to avoid the worst of the coronavirus fallout, and continue the initial recovery that began in earnest at the end of Q2. Hopefully, they’ll expedite the nation’s economic recovery too, creating a scenario where growth can return fully before the end of 2021.