Thailand’s economy may contract as much as 6%

The new projection follows data showing GDP shrank 1.8% in 1Q from a year ago, the first contraction since 2014

BANGKOK • Thailand sees its economy contracting as much as 6% this year, among the worst in Asia, as the coronavirus outbreak cut off travel to the tourism-reliant nation and shuttered commerce.

GDP is forecast to shrink 5%-6% in 2020, the National Economic and Social Development Council said yesterday. The estimate is “based on a limited outbreak in the second quarter (2Q)”, the council’s secretary-general Thosaporn Sirisumphand told journalists, adding that “the situation is still hard to predict”.

The new projection follows data showing GDP shrank 1.8% in 1Q from a year ago, the first contraction since 2014. That was lower than the median estimate for a decline of 3.9% in a Bloomberg survey of economists and compares to revised growth of 1.5% in 4Q.

Thailand’s economy is heavily reliant on tourism and trade, both of which have taken a severe knock as countries around the world imposed restrictions to contain the pandemic. Official data showed a 74.6% plunge in foreign tourist arrivals in March compared to a year ago.

“We don’t really see the full impact in this quarter yet,” said Somprawin Manprasert, chief economist at Bank of Ayudhya pcl. “The worst is coming in 2Q,” and most of the population will be affected, he said. Without the fiscal and monetary easing already undertaken, “it could be much worse”, he said.

The government has stepped in with a stimulus package worth about 15% of GDP — among the largest in Asia, according to the World Bank. It’s also borrowing 1 trillion baht (RM136.34 billion) that will “help sustain the economy”, Thosaporn said. He said the economy will likely bottom out in 2Q, with exports and tourism unlikely to recover until late this year or in 2021.

The country’s benchmark SET Index rose 0.4%, while the baht was up 0.1% against the dollar as of 10:14am in Bangkok yesterday.

The pace of recovery will depend on how quickly the economy can reopen from lockdown restrictions. The government began easing some restrictions this weekend, with shopping malls and retail businesses reopening. The chances of a second wave of infections are low, officials said yesterday.

The Bank of Thailand is expected to cut its key interest rate by 25 basis points to 0.5%, when it meets tomorrow, according to most economists surveyed by Bloomberg. The government yesterday forecast inflation of -1.5% to -0.5% this year, giving the bank room to ease.

GDP fell a seasonally adjusted 2.2% in 1Q compared to the previous three months, better than the median estimate of a 4.2% contraction in a Bloomberg survey of economists. The 4Q figure was revised down to a 0.2% contraction compared to the prior three months.

“There are few silver linings in today’s report, and 2Q is naturally going to be much worse than what we saw this morning,” said Howie Lee yesterday, an economist at Oversea Chinese Banking Corp Ltd in Singapore. “With today’s result, we also now heavily expect another rate cut in this week’s Bank of Thailand policy meeting.” — Bloomberg