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Recovering global trade supports APAC economies but Tourism exposure will temper Thailand’s rebound

The direct contribution of travel and tourism to Thailand’s economy was around 10% of GDP before the pandemic, but the economic repercussions of a significant slowdown are more widespread given a large informal tourism sector.

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Export growth better-than-expected in December 2020. However, amid the second wave of COVID-19 infections, exports could fall below previously forecasted levels in 2021.

Moody’s Investors Service says in a new report that a resurgence in coronavirus cases along with low vaccination rates in Asia Pacific (APAC) pose renewed risks to domestic demand, although recovering global trade will support the region’s more export-oriented economies.

Despite Thailand’s (Baa1 stable) export-focused manufacturing sector, with goods exports worth 45% of GDP, reliance on international tourism receipts is relatively high, at about 20% of total exports as of 2019, says Moody’s in the report “Sovereigns – Asia Pacific: Lagging vaccinations pose risks to domestic demand; exports provide buffer for some”

The direct contribution of travel and tourism to Thailand’s economy was around 10% of GDP before the pandemic, but the economic repercussions of a significant slowdown are more widespread given a large informal tourism sector.

This exposure will drag on growth even as the country partially reopens to tourism, with the authorities planning to waive quarantine requirements for vaccinated visitors, starting with the tourist hotspot of Phuket Island from July.

The government aims to accelerate inoculations ahead of that; so far, around 8% of the population has received a first dose of the coronavirus vaccine.

Moody’s expect Thailand’s real GDP to expand 2.8% in 2021, marking a relatively shallow rebound from a 6.1% contraction in 2020, with a stronger 5.8% increase in 2022, reflecting the lagged recovery in the tourism industry.

From 1 July, Phuket will waive quarantine requirements for foreign tourists who have been fully vaccinated against COVID-19 under the “Phuket Tourism Sandbox” model. The main goal is to be able to revive the local economy and prevent the spread of the pandemic at the same time. The model is being touted as a model for the reopening of the tourism industry.

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