Thailand’s economy depends on tourism and foreign trade. Industry, services, consumption and investment are shrinking. Some industries are slowly recovering from the shock.
Covid-19: General situation and economic development
The corona-virus is seriously damaging the economy. Businesses and consumers are preparing for a long crisis (as of September 27, 2020).
Thailand expects the worst economic downturn in Southeast Asia
The office of the Thai think tank National Economic and Social Development Council reports that the gross domestic product (GDP) in Thailand declined by 2 percent after adjustment for prices in the first quarter of 2020, and by 12.2 percent in the second quarter of 2020, compared to the same period of the previous year.
The GDP forecasts of various economic researchers for 2020 as a whole are now between minus 8 and minus 6 percent. The Asian Development Bank (ADB) forecast on 15 September 2020 in its report Asian Development Outlook that: in 2020, Thailand’s GDP will shrink by 8 percent.
The ADB gives the most negative outlook among the Southeast Asian countries for Thailand. Experts fear that a worsening crisis with falling consumer spending, falling investments and rising unemployment is looming.
The research department of the Bank Krungsri says that: at present only a third of the company is financially healthy. The Thai central bank also fears that companies and consumers will no longer be able to service their loans.
The banks therefore help with rescheduling. The ADB describes the financial market as robust. The state and banks have sufficient reserves to at least mitigate the recession and support an upturn.
The ADB also predicts that the economy will grow again in 2021, by 4.5 percent. Other experts do not expect a return to normal growth until 2022. Renewed interruptions in supply chains, worsening trade conflicts and further Covid-19 waves could jeopardize the longed-for recovery.
Isolation in order not to jeopardize success against Covid-19
Thailand ranks among the top five nations in the country rating of the global Covid-19 Recovery Index. The Department of Disease Control finds new infections almost only among the few people who are allowed to travel to the country from abroad.
The successes in the fight against Covid-19 are considerable and prompted the government to reopen shopping centers, restaurants and shops from mid-May 2020. Also, the domestic air traffic now takes off again.
Normal everyday life, a little better mood
Business and everyday life are back to normal. The business climate among entrepreneurs and the mood among consumers have therefore recovered slightly from their lows in April 2020. But they are still below the survey values before the start of the corona crisis.
The government declared a state of emergency on March 26, 2020 and has been extending it monthly since then. Prime Minister Prayut Chan-o-cha and the Center for Covid-19 Situation Administration (CCSA), which is responsible for the Covid-19 countermeasures, have since determined quarantine regulations and entry bans, among other things.
The external borders have been largely closed to passenger traffic since March 21, 2020. Because tourists and business travelers do not receive an entry visa, important service sectors such as tourism and the trade fair industry suffer.
Tourism remains the Achilles’ heel
Many hotels, resorts, their owners and employees fear for their future. In 2020, international tourism is likely to shrink by at least two thirds. Almost 40 million foreign tourists directly and indirectly contributed around 20 percent to GDP in 2019. They spent around $67 billion (US$) in Thailand.
The Center for Covid-19 Situation Administration would like to let foreign tourists into the country again from October 2020. However, they should then be quarantined in a hotel for two weeks. Therefore, only guests who are planning a longer stay will travel to the country again.
Domestic tourists also spent an impressive US $ 36 billion in their homeland in 2019. Since July 2020, the Ministry of Finance has been stimulating domestic tourism through subsidies for hotel bookings and air travel, as consumers have lower incomes due to rising unemployment and cuts in salaries.