The Bank of Thailand (BOT) said on Wednesday that Thailand’s GDP will contract by 5.3 per cent in 2020, a drastic lowering from its previous projections in December which saw the economy expanding by 2.8 per cent this year.
For 2021, the central bank expects the economy to bounce back with a growth of 3 per cent.
Senior director of the BOT’s monetary policy division Don Nakornthab said the coronavirus outbreak has severely impacted the Thai economy, especially with regard to exports and tourism.
The bank now expects foreign visitors to decline by 60 per cent in 2020, while major trading partners’ economies are significantly slowing down and some are going into recession. More than 39 million visitors visited the Kingdom last year. The BOT also expects the value of exports to contract by 8.8 per cent, down from the previous prediction of a 0.5 per cent expansion.
If the outbreak worsens and is prolonged, its impacts on income, confidence and economic activity will be widespread. Going forward, the economic potential will depend on the government’s supportive measures, along with changing consumer behaviour and business activities.
“The outbreak’s impact on the export of merchandise and on services is now affecting purchasing power within the country,” he said. “However, the contraction in the economy will be temporary, as the economy should be able to expand when the outbreak situation has improved,” he added.
Don said the impacts of the outbreak on the Thai economy will be most severe in the second quarter of this year due to the travel restrictions and temporary closure of various businesses. He added that the economy should begin to recover by the second half of this year.
The BOT’s senior director said inflation will be negative this year, and will come back to the positive side next year. But both numbers are still lower than the targets.
Nevertheless, the risks to the economy still exist and its situation could worsen, depending on how long the outbreak will last, Don added.
The BOT’s predictions came after the University of the Thai Chamber of Commerce (UTCC) warned last week that the Thai economy is going into recession. The UTCC’s prediction was, however, much less severe than the BOT, as they expect the contraction to be at least 0.5 per cent, not the more than 5 per cent that the central bank is now predicting.
At the same press conference, the BOT’s Monetary Policy Committee announced that they are maintaining the policy interest rate at 0.75 per cent, following the emergency rate cut of 25 basis points last Friday. The BOT already brought the rate down to the historic low of 1 per cent last month.
Photo: Don Nakornthab, Senior Director of the BOT’s Monetary Policy Division. Courtesy of the BOT.