Thailand’s 3rd wave of COVID-19 once more raises economic uncertainties

Thailand is going through the 3^rd wave of the pandemic currently and the ability of the country to be able to contain the spread of the disease is going to be the key to helping revive the slowing economy.

The key focus of the country in containing the 3rd wave will be to vaccinate and this process is only starting to begin in Thailand. The actual vaccination is set to pick up after June when Thailand’s own vaccine production is set to enter the market.

But despite the expectations of vaccination, the past two weeks has seen the number of COVID-19 cases rise sharply. When this new wave will end is unknown, as it again depends on how well all involved parties resume their shared effort to contain the spread of the virus, amid only gradual progress in domestic vaccinations.

Before this latest wave, KResearch had expected that the country would gradually enjoy a return of tourist visits in the last quarter of this year, with the number of tourist arrivals for 2021 was projected to reach 2 million people, compared to 6.7 million people in 2020. 

This would then lead to an upsurge in domestic activities, and thus the country could have ended the year with the gross domestic product (GDP) reaching 2.6 per cent.

Nevertheless, this third round of COVID-19 will not only affect plans to reopening of the country to foreign tourists but will also curb any desire for domestic travel among Thais. 

For the first half of 2021, revenue from Thai tourists is projected to fall by 130 billion baht to 137 billion baht, due to the third wave of the pandemic. 

Revenue from Thai tourists

Source: KResearch estimate

Note: * information from Ministry of Tourism and Sport

Another lockdown could precipitate a decline in 2021 GDP

As the government tries to control the spread of the virus and prepares field hospitals to accommodate the rising number of cases, the spread of the virus could dent the economy and the potential spending to stimulate the domestic economy.

Such uncertainty also leads to the growing possibility that foreign tourist arrivals will be less than 2 million in 2021. Further impacts will be felt whether or not the virus situation ultimately leads to any lockdown, either partial or full, all of which would eventually lead this year’s GDP to lean towards the lower end of our projected range of 0.8-3.0 per cent.

For businesses, it means they need to reserve extra liquidity for the next 6-8 months. However, for tourism-related businesses that are depending upon the high tourism season in the fourth quarter of 2021, the need for liquidity reserves might increase to 17 months. That said, cost leaning remains highly necessary, while businesses might consider outsourcing more of their operations as a cheaper alternative.

However, for those suffering a temporary liquidity shortage, participating in the second Soft Loan facility introduced by the Bank of Thailand could be an option. 

In the meantime, businesses can still negotiate with the financial institutions that are their lenders for debt restructuring and/or debt holidays, while businesses with repayment difficulty can join the Asset Warehousing program with buy-back options that will help lessen their debt burden during the 5-year program period and allow asset owners to keep their businesses running by paying some rents to financial institutions.

Awaiting additional government stimulus measures which would help relieve COVID-19 impacts

Following lingering economic uncertainty, the government could launch additional stimulus measures using its available fiscal resource of 200 billion baht under the 1 Trillion baht Emergency Decree Loan for Helping the Economy. If the situation gets worse than expected, the government could be forced to lift its 60 per cent public debt ceiling for more stimulus measures.

This potential government spending, together with the progress of mass vaccination, would play a key role in reviving the Thai economy in the near future.

Lastly, for all of us, don’t forget to remain on your guard and stay home, if possible, to prevent the spread of COVID-19.