Thailand’s economy saw its biggest annual contraction in 22 years and a record quarterly fall in the April-June period, as the coronavirus pandemic and restriction measures hit tourism, exports and domestic activity, prompting an outlook downgrade.
Southeast Asia’s second-largest economy, which is heavily reliant on tourism and exports, shrank 12.2 percent in the second quarter from a year earlier, the worst contraction since the Asian financial crisis in 1998, data from the state planning agency showed.
But that was better than the average forecast for a 13.3 percent slump in gross domestic product (GDP) in a Reuters poll, and compared with a downward-revised 2.0 percent fall in the January-to-March quarter.
On a quarterly basis, the economy shrank by a seasonally adjusted 9.7 percent, the deepest on record, but better than the 11.4 percent drop forecast by economists.
“Thailand’s recovery in the months ahead will be held back by the external sector,” Alex Holmes, Asia economist at research firm Capital Economics, said in a research note sent to Al Jazeera.
“Spending by foreign tourists was equivalent to around 10 percent of GDP before the crisis and fell to effectively zero by the end of March, where it has remained since,” Holmes added.
Capital Economics said it is projecting a 9 percent contraction for Thailand’s economy over the whole of 2020, which would be “far more severe than in most of Asia.”
The National Economic and Social Development Council (NESDC) cut its gross domestic product forecast for 2020. It now expects Thailand’s economy to shrink by 7.3-7.8 percent this year, having previously forecast a 5-6 percent contraction.
“Today’s economic release underscores the collapse of aggregate demand, both externally and internally,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
“Recovery will be lengthy as the shock to the demand and supply side has been the most severe in living memory,” he said.
While Thailand has lifted most lockdown restrictions after seeing no local transmission of the coronavirus for more than two months, its economy continues to suffer from an ongoing ban on incoming passenger flights and from tepid global demand.
The number of foreign visitors fell to practically zero in April-June, and Thailand has also shelved plans for travel corridors with selected countries amid a rise in new coronavirus cases.
The planning agency expects only 6.7 million foreign tourists to come to Thailand this year, down 83 percent from last year’s record 39.8 million.
The downturn comes despite government efforts to support the economy with a 1.9 trillion baht ($61.03bn) fiscal stimulus package, while the central bank has slashed interest rates by 75 basis points so far this year to a record low of 0.50 percent.
The impact of the lockdown and the travel ban will continue to affect domestic consumption and investment, with anti-government protests adding to the risks, while exports will remain weak due to soft global demand, analysts say.
The state planning agency also cut its forecast for exports this year, expecting them to fall 10 percent in 2020 versus a previous forecast for an 8 percent decline.