Tourism slump beaches Thailand’s post-pandemic optimism 

South-east Asia's second-largest economy downgrades its economic outlook despite smaller fourth quarter GDP fall as tourist arrivals continue to plummet 

by Sean OMeara
Tourism slump beaches Thailand’s post-pandemic optimism 
Last year saw only 6.7 million foreign tourists visit Thailand as opposed to nearly 40 million arrivals in 2019.

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.

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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.

GDP DATA

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.

KEY DRIVER

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

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