Finance Ministry slashes 2021 growth outlook due to Covid-19 and dormant foreign tourism sector
The Thai government has reacted skillfully to the second wave with targeted controls in zones of infection and timely initiatives to support the less well off as well as struggling business concerns. It also believes that it has the right vaccination strategy already on the move with the first inoculations due in February.
Thailand’s Finance Ministry, on Thursday, confirmed that it has cut its GDP growth outlook for 2021 with Fiscal Policy Office acting chief, Kulaya Tantitemit, highlighting the loss of foreign tourism activity as a key factor. It comes as the government has initiated targeted support measures this week aimed at business, the less well off and the country’s large self-employed sector.
Thailand’s Finance Ministry, on Thursday, slashed its projected GDP growth figure for the economy from 4.5% to 2.8% as the kingdom continues to battle a second wave of the Covid-19 virus with some success. At the same time, the outbreak continued to produce significant infection numbers in the province of Samut Sakhon and there is concern that it could still flare up in Thailand’s capital, Bangkok, located nearby.
However, on Thursday, speaking with Bloomberg News in New York, the Acting Head of the Fiscal Policy Office at the ministry, Kulaya Tantitemit, said that the primary reason for the scaled-back growth projection was a fear that tourist arrivals in 2021 would now be far lower than projected.
Covid-19 second wave has given rise to uncertainty
She also highlighted the second wave of the Covid-19 virus which has generated increased uncertainty and confusion. This feeds into lower consumer confidence.
‘The impact of a new wave of the outbreak is hurting the economy this year and contributes to the 2021 GDP downward revision,’ she explained.
The current set back to the economy, however, must be balanced out by a revised estimate for the GDP contraction in 2020 because of a more buoyant third quarter than initially recorded. This was revised downwards to 6.5% from the 7.7% indicated at the end of 2020.
Officials have curbed the latest outbreak
The current Covid-19 outbreak has seen the kingdom’s number of infections climb to 16,221 cases as of Thursday with 76 deaths. The government, so far, has managed to curb the trajectory of the second wave which has seen targeted restrictions and control measures in zones of higher infection.
There are currently moves underway to ease the restrictions from the first week of February.
Swift and skilful government reaction but the stalled foreign tourism industry still presents a big challenge
The government has reacted swiftly to this second emergency with cuts in utility bills and only this week, significant cuts to social security fund payment for firms were approved by the cabinet.
Nonetheless, the kingdom’s foreign tourism industry, a huge employer and money-spinner, has been left decimated with its leadership this week telling top officials that 1 million jobs will be lost by the end of March if government co-payment schemes with employers for salaries are not urgently introduced.
Exports are projected to rise
Thailand’s exports are projected to grow by 6.2% in 2021 but the government must regain the rising consumer confidence seen in the third quarter last year and finally reopen the country’s doors to foreign tourists to see the economy fully perform.
Thailand confident its vaccination strategy is the right one based on its partnership with AstraZeneca
The economic situation has also been clearly linked, this week, to the country’s vaccination efforts with the government adamant that it has the right strategy especially with the development of a production facility in Pathum Thani for the manufacture of the AstraZeneca jab by Thai firm Siam Bioscience for Southeast Asia.
Although still clouded in contradictory statements, the vaccination programme is due to start in February with medical staff in Samut Sakhon and up to a million people in the wider front line from health workers dealing with the disease to the most vulnerable including the elderly and those with underlying diseases, among those to receive doses.
Its implementation, timeline and projected outcomes are linked also to the recovery of the economy’s potential.
Latest foreign tourists estimate is 5 million
Ms Kulaya, on Thursday, said that the ministry is now forecasting 5 million tourists from foreign countries for 2021 which is only half what the Tourism Authority of Thailand and the Minister of Tourism and Sports, Phiphat Ratchakitprakarn, are currently predicting.
Even this figure is dependent on mass-market entry without mandatory quarantine based on the extraordinarily low level of incoming travellers seen under the current entry criteria which, in December, came in at 0.17% of the volume from the year before.
It is also being reported that the Ministry of Public Health is still looking at the effects of vaccination programmes in other countries and how vaccine passports might be safely employed to boost entry numbers in the latter half of the year.
This will ultimately be a decision for the Centre for Covid-19 Situation Administration as the government continues to emphasise that public health as its overarching priority.
฿210 billion scheme to benefit over 30 million Thais who are most vulnerable to the economic downturn
The Finance Ministry also, this week, announced a ฿210 billion direct payment scheme aimed at the less well off and the self-employed in Thailand.
This later sector is a significant economic driver in Thailand’s huge grey economy which plays a vital role and is a cohesive force also in society providing services and goods to the poor in the kingdom.
The scheme is expected to benefit over 30 million people and offer ฿7,000 per head in supports.
Not direct cash but an ‘e-payment’ credit to be used in registered retail outlets for essential staples
The money will be paid in an ‘e-payment’ which cannot be directly withdrawn for cash but which can be used in registered stores to purchase staples with the exclusion of products such as alcohol and cigarettes.
The scheme, based on the success of others like it, gives some idea of the hardship being borne throughout Thailand as the country’s economy battles to make progress with the loss of foreign tourism which both directly and indirectly contributes up to 20% of GDP.
Those eligible for the scheme are people who have qualified for other support programmes, those in receipt of social welfare payments, with an income of less than ฿300,000 per year and who at the end of 2020, had less than ฿500,000 in the bank.
Stock market dive on Thursday
On Thursday, the Stock Exchange of Thailand fell by nearly 2% as investors reacted to news that the Federal Reserve in the United States has declined to take further action to combat the effects of the Covid-19 virus there.
The exchange has also seen an outflow of foreign investment in recent days.
About the Author
Carla Boonkong is a magazine writer who writes extensively about woman’s issues in Thailand. One of her key subjects is the story of Thailand’s growing influence in the world and the role played by Thai women in the process. She is now a staff writer with Thai Examiner.com in Bangkok. Son Nguyen is an international writer and news commentator specialising in Thai news and current affairs. He commenced working with the Thai Examiner News Desk in May 2018.