Thailand’s drastic fall in tourist arrivals because of the worldwide pandemic has helped see its economic growth estimate for this year cut to 2.5% to 3.5%.
The South-east Asian powerhouse suffered its worst slump in more than two decades in 2020 due to the Covid-19 outbreak.
The government had previously forecast growth of 3.5% to 4.5% for this year but with the vital tourism sector still in limbo, and a domestic virus outbreak in December, the country's recovery has been dealt another blow.
The latest data had shown the economy shrank less than expected in the October-December quarter as domestic activity and exports recovered after coronavirus restrictions were eased.
But last year saw only 6.7 million foreign tourists versus nearly 40 million arrivals in 2019 – and forecasts for this year are predicting just 3.2 million foreign tourists, down from an earlier forecast of 5 million arrivals.
South-east Asia's second-largest economy shrank 4.2% in the final quarter of 2020 from a year earlier, after a 6.4% contraction in the previous three months, National Economic and Social Development Council (NESDC) data showed on Monday.
On a quarterly basis, the economy expanded a seasonally adjusted 1.3% in the December quarter, after a revised 6.2% expansion in the September quarter.
Somprawin Manprasert, chief economist of Bank of Ayudhya, said the GDP data was not a surprise and the economy should return to pre-pandemic levels in the third quarter of 2022, slower than earlier expected.
"Having had a bad crash, the economy was hit on the back by the second wave, so it's difficult to recover," he said.
The main stock index rose 0.6% after the GDP data while the baht gained slightly to 28.83 per dollar.
In 2020, the economy contracted 6.1%, the biggest fall since 1998, during the Asian financial crisis.
Thailand had largely contained the spread of coronavirus by mid-2020 but new cases in December led to infections across the country and slowed consumption and domestic travel.
The NESDC now expects exports, also a key driver of growth, to rise 5.8% this year, rather than expand 4.2%.
"Fiscal support will be key to underpin the recovery this year as monetary easing runs its course," said DBS economist Radhika Rao.
The government has supported the economy with a 1.9 trillion baht ($63.61 billion) stimulus package, while the central bank has slashed interest rates by 75 basis points last year to a record low of 0.50%.
- Reporting by Reuters