Connect with us


Thailand’s economic outlook for 2021

The government expects inbound tourism to be at around 8 million by the second half of 2021, well below 40 million in 2019



The Thai economy will grow next year after contracting by almost 10% this year. Next year, the Thai economy is expected to expand 3 to 4% from this year. It will not be until the end of 2022 before the Thai economy returns to its pre-Covid level of 2019.

However, if there is another wave of Covid-19 in Thailand, or if effective vaccines are delayed, the recovery could be slower than anticipated.

The recovery is contingent upon a rebound in tourism and exports

Should large-scale vaccination become available by June 2021, large, advanced economies such as the US, EU, Japan and China, which will be first to receive the vaccines, could start to recover by the second half of next year. This would allow greater international tourism and exports for Thailand then.

The government expects inbound tourism to be at around 8 million by the second half of 2021, well below 40 million in 2019. The majority of tourists will be from China, while the remaining will be from Covid-free countries. Foreign tourism receipts will only return to their pre-Covid levels once the pandemic is over.

Thailand’s exports to its major markets – US, China, EU, and Japan – will grow with the recovery of these markets. Exports of goods are likely to fall by 8% this year before expanding by 4-5% next year.

Exports will only recover to their 2019 pre-Covid level in 2022

However, revenues from exports in baht terms will be below that of 2019 as the baht will remain strong at around 30 baht to the US dollar.

With the slowdown in exports and tourism so far, the incomes of local businesses and their employees have declined. Small and medium enterprises have been particularly affected as they do not have sufficient liquidity to outlast the economic downturn.

SMEs employ over 90% of workers in the non-agriculture and non-public sectors, or 13 million of the Thai workforce. Work hours of the Thai labour force have so far this year declined by almost 10% compared to last year. Work hours should improve next year but will remain below that of 2019.

Farm incomes have also been affected by the pandemic

he latest TDRI research shows that more than half of farm household incomes are from non-farming activities such as remittances from their children and their off-farm season work in construction, restaurants, handicraft activities, etc. Incomes from these sources have fallen since the pandemic.

The fall in work hours and incomes has also affected domestic purchasing power and household debt. As of October, purchases of non-durable goods (beverages, food, tobacco, etc) have recovered to its pre-Covid levels but not of durable goods (automobiles, electrical appliance, clothing, etc). Domestic tourism spending remains half that of October last year. On the other hand, household debt has been rising faster than it had. In quarter two, household debt stood at 84% of GDP and is rising; this will limit spending in the future even when the pandemic is over.

The public sector remains the only key engine of the Thai economy

The government has ample resources to spend next year. Only 30% of the one-trillion-baht loan this year has been disbursed. Together with next year’s budgets of the central government, local administration organisations, and state-owned enterprises, the public sector’s resources add up to more than four trillion baht (around 25% of GDP). Public spending and investments will need to speed up next year to counter the negative impacts of the pandemic on SMEs and workers.

Oil prices, inflation, and interest rates will remain low. The price of oil is forecast to rise to close to US$50 (1,511 baht) per barrel next year, but remain well below the price of $65 per barrel in 2019. With low oil prices and a slow recovery of demand in the country, inflation will remain below 1% next year. Similarly, interest rates will be close to zero as world interest rates will remain near zero until 2022.

There are downside risks to the projections discussed above. The major risks to economic recovery include the effectiveness of vaccines and the potential additional waves of the pandemic in Thailand. The global trade environment, will be more unfavourable than during pre-Covid period as the trade and technology wars between US and China will continue, while many countries will become more protective of their domestic businesses during this economic downturn. This will affect the recovery of Thai exports.

While most businesses are yet to recover to their pre-Covid levels, there are businesses that have grown during the pandemic. They include digital and related business such as e-commerce, delivery and packaging services, IT solutions, cyber-security services, healthcare and hygiene products and insurance.

Relocation of production capacity from China to Asean, especially to Vietnam and Thailand continues as firms diversify their risks out of China. Automotive and electronics industries are, for example, relocating production for markets outside of China to Thailand. Businesses that are related to public sector investments and activities will continue to grow next year as public spending expands.

Kirida Bhaopichitr, PhD, is Research Director for International Economics and Development Policy at the Thailand Development Research Institute. Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

The post Thailand’s economic outlook for 2021 appeared first on TDRI: Thailand Development Research Institute.

Source link

Click to comment

Leave a Reply


Asia’s slow rate of vaccination is a thorn in the region’s economic recovery

Southeast Asia has been hit badly. Daily infections for Indonesia, Thailand, Vietnam are at their worst, on a seven-day moving average. The Philippines and Malaysia are not far off their daily infection peaks reached in the second quarter of 2021.



Last week was tough for the Asia-Pacific region. Many countries responded to stubbornly elevated daily infections by extending or tightening social distancing measures.

Continue Reading


World Bank lowers Thai GDP growth outlook to 2.2%

In the Thailand Economic Monitor released today, the World Bank adjusted its outlook on Thailand’s economic growth this year to just 2.2% from its previous forecast of 3.4%.



BANGKOK, July 15, 2021 – Thailand’s economy continues to take a heavy toll due to the COVID-19 pandemic and is projected to expand modestly at 2.2 percent in 2021, revised down from the 3.4 percent growth projected in March, according to the World Bank’s latest Thailand Economic Monitor “The Road to Recovery” published today.

Continue Reading

Most Viewed

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 14,159 other subscribers