The Siam Commercial Bank (SCB) on Wednesday further cut its economic forecast for 2021 to 0.7-per-cent growth due to a worse-than-expected Covid-19 impact on private spending and tourism.
The latest projection by the bank’s Economic Intelligence Center (EIC) is down from the previous estimate of 0.9-per-cent growth made in July following the third wave of the Covid-19 epidemic.
“Private spending has been significantly impacted by the domestic outbreak and lockdown measures,” said SCB’s Chief Economist Yunyong Thaicharoen, as reflected by an 8-per-cent year-on-year drop in July’s private consumption index.
In a worst-case scenario where lockdowns are imposed again, the economy will likely contract, he warned.
Following rising concerns about the domestic Covid-19 situation, Yunyong downgraded the tourist arrivals forecast in 2021 to 170,000, from 300,000 previously.
The EIC anticipated the economic consequences from the virus would reach their peak in the third quarter before beginning to recover in the early fourth quarter due to the improved inoculation rate.
Looking forward, the research house predicted the country’s economy to grow 3.4 per cent in 2022, with domestic and foreign demand recovering. Exports should continue to expand, but at a slower pace, in line with the global economy.
The recovery, the EIC said, will only be “gradual” as tourism demand may not rebound quickly, coupled with a fragile labour market and high debt levels that would continue to put a downward pressure on the economy.
The “economic damage is deepening,” said Yunyong.
He urged the government to consider more borrowing to bolster economic recovery, even if the public debt cap has to be raised, and said authorities “must communicate a convincing fiscal consolidation plan” to enhance public trust.
The EIC expected that the Monetary Policy Committee would keep the policy rate at 0.5 percent in 2021 and 2022 to maintain the recovery momentum.