So far the year of Rat (2020) has been one for the history books. It is a year that our children and grand-children will talk about in the same way that we do when we talk about the Spanish Flu in 1918.
The positive news is that the year is almost done, with three months to go, and we can finally start looking forward to 2021.
What to look out for as 2020 winds down
All of us have faced hardship in this challenging year. For the remaining three months, let’s see what the future may hold so that we can be prepared, set out a plan, and make adjustments accordingly.
First of all, let’s look at the domestic front. Aside from political issues, especially a series of protests, close attention should be paid to the reopening of the long-stay tourist market under the Special Tourist Visa scheme which will commence in October and is expected to welcome at least 1,200 international travelers a month on average. We should closely monitor the number of arrivals, their countries of origin, and their intended destinations. Most importantly, much attention will be given to the results of this pilot model, as it will strongly influence authorities’ policy implementation and the timing of Thailand’s eventual full reopening.
If no new virus infections are detected from these foreign travelers or Thai locals, or even if infections are found but immediate action is taken to control the viral transmission, the inbound tourist market could finally see a light at the end of the tunnel. In any case, it will be later rather than sooner before Thailand fully reopens its inbound travel market.
The juncture between the scheduled end of the government’s assistance measures and their continuation in order to reinvigorate the moribund Thai economy, and the worrisome unemployment situation, also merit a close watch. After the relief measures and debt moratorium come to an end, the survival of vulnerable businesses and households will remain high on the agenda out of concern that the Thai economy could again go into a tailspin despite having shown signs of improvement following the easing of COVID-19 restrictions.
Nonetheless, the government is prepared to issue additional measures to sustain the Thai economy, especially through the support given to the private sector to hire new graduates, liquidity boosting for small SMEs, and other efforts. This include the relief measures under the emergency decree on borrowing of THB100 billion. To cope with the fluid situation, these initiatives are much needed, given that no new positive developments are in sight.
2021 Budget
The enactment of the FY2021 annual budget draft bill is another domestic factor worth monitoring. If disbursement of the government’s investment budget goes smoothly as planned, or it is not much delayed, the government’s spending will be instrumental in mitigating the adverse impacts of the economic downturn.
Looking elsewhere, focus must be primarily on the COVID-19 pandemic in major countries and its impacts on the global economy, especially those countries which are Thailand’s trade partners. Another relevant issue is success in COVID-19 vaccine development. The latter will affect the timing in the distribution of the vaccine among Thais on a broad scale – presently expected to occur by around late 2021. This would not only affect the general public in terms of public health, but also have much to do with economic activity in all economic sectors, especially the industry and service sectors, international travel, household purchasing power, and employment, alike. In our view, the global economy by year-end may not see a significant change compared to the consensus for the entirety of 2020 – wherein a global economic contraction of 5-6 percent is projected due to the COVID-19 crisis.
US presidential election
All eyes are on the US presidential election slated for November 3, 2020. But in all likelihood the potential change in the US President (as reflected in various polls that show Joe Biden continuing to lead Donald Trump) may have little impact on Thailand. The US stance towards China, including its trade dispute and the US-China technological race, and the US stance towards ASEAN including Thailand, may remain unchanged. Instead, this factor may indirectly affect movements in the capital and money markets, including foreign exchange, stock indices, bond yields, and gold prices.
We should also closely monitor the progress of Brexit in light of the drafting of the UK’s Internal Market Bill and negotiations to find solutions before the deadline of Britain’s withdrawal from the European Union, scheduled for January 1, 2021. Last but not least, focus should be on how China will act upon the Dual Circulation Strategy – its new economic development blueprint that is intended to avert impacts from disputes with other countries, especially the US, with more emphasis than before on its domestic businesses.
Domestic Factors to play a role
All in all, Thailand may not directly feel the pinch of the aforementioned domestic factors as the year-end is approaching. Given the intertwined global economy, however, an event that disrupts one country will inevitably have repercussions for the rest of the world. Therefore, Thai businesspersons and investors should not sit idle, but keep track of the latest developments and set out a plan to cope with possible impacts. To be more specific, they should enter into a risk prevention contract to hedge against forex volatility, and always be on guard against the consequences of the changing global supply chain, going forward.
As numerous downside risks – both internally and externally – loom large, all parties concerned should be well-prepared for them so that we can stay afloat and survive this unprecedented crisis, sustainably.