Preview: Thai economy set to face uphill battle in 2022

Thailand’s economy is set to face yet another year of pain as the lack of policies coupled with a global trend of rising inflation, interest rates, and oil prices are all likely to take a toll.

Thailand, is expected to see its gross domestic product (GDP) rise by as much as 3.4% in 2022 after an estimated growth of 0.9% in 2021.

What is prompting preditions of the 3.4% growth, as put forward by the Bank of Thailand (BoT), is expectations that tourism will rebound this year.

Tourism accounts for nearly 13% of the GDP and could indeed see some recovery during the later part of the year but with the outbreak of the new Omicron variant of the Covid-19 virus, the decision by the government to shut its borders is likely to dampen hopes of a 3.4% growth.


Thailand, which saw 40 million international visitors in 2019 and billions of dollars in revenue, was one of the hardest hit countries when the pandemic shut down international travel.

Though hard hit, tourism gradually recovered, fueled in part by favourable government policies which encouraged international travelers including a “sandbox” model and a Test and Go program which allowed vaccinated travelers to enter quarantine free.

Thailand’s decision to scrap the ‘Test & Go’ program which was in place for only a month before the Omicron outbreak will likely dent travel enthusiasm in the first quarter.

If first quarter numbers are below expectations, it will adversely affect the 12% of the country’s work force, nearly 4.5 million people, working in the tourism sector.

“The decision by the government to put an end to ‘Test & Go’ system is unlikely to help Thailand see a recovery in the tourism sector this year,” a regional economist from a major European bank based out of Singapore said.

He added that the steps taken are too stringent taking into consideration that there is no way that Thailand would be able to halt the spread of the Omicron variant as it already has entered the country and that the variant is milder than other strains.

Citing the example of more extreme lockdowns and stringent measures such as those in Hong Kong and China, which are starting to see cases of Omicron variant, this economist said that it was impossible to control the spread of the new variant.

Other economists were of similar view and added that with the continued stringent controls by China,, one of the key components of the Thai tourism market – Chinese tourists – are unlikely to return anytime soon.

Chinese tourists accounted for nearly 20% of the 40 million tourists that arrived in Thailand in 2019 and this market segment is unlikely to rebound anytime soon.

The BoT expected Thailand to receive 280,000 visitors in 2021 – up from a previous projection of 150,000 – but cut the 2022 forecast to 5.6 million from 6 million, in light of the recent halt of quarantine-free arrivals.

The BoT said that it expects to see as many as 20 million visitors into Thailand in 2023, which would still be only 50% of the pre-pandemic levels.

Inflation & Interest Rates

The world, not just Thailand, is starting to face the issue of inflation and rising interest rates. Although there is every likelihood that the Thai government may try to control the inflation numbers, their success rate is anyone’s guess.

For the year 2021, Thailand’s inflation stood at 1.23%, although for the month of December it stood at 2.17% and for November it was at 2.71%.

Charnon Boonuch, the Thailand economist at Nomura (Singapore) says that the bank projects Thailand’s headline inflation at 1.2% for the year 2022 although the market consensus is at around 1.6%.

Inflation has kicked in and among the reasons is the oil price, the flooding that caused shortage of vegetables and now the African Swine Flu that is causing the rise in meat prices.

Globally oil prices are on the rise as economies around the world start to recover from the Covid-19 outbreak in 2020/2021 and with nearly 65% of the oil needs of Thailand being fulfilled with imports, the likelihood of higher oil prices impacting the consumers is set to consumption will likely be affected.

The central bank has said that it expects headline inflation to remain within the 1%-3% target range in coming years, and for 2022 it has a projection of 1.7% (up from 1.4%) and 1.4% in 2023.

As for the core price index (CPI) the BoT expects it to ease in the second half of 2022, but the Monetary Policy Committee (MPC) sees risks of higher-than-expected inflation amid rapid price increases globally.

To tame inflation, interest rates are set to rise globally, and it is unlikely that Thailand would be able to maintain the 0.50% repurchase rate (REPO) that the BoT has set out to do.

Although the MPC has said that it would want to maintain the rates for now.

Domestic Consumption

About 50% of Thailand’s GDP component is from the domestic consumption, this component of the GDP is most important to keep the domestic economy humming.

As per the latest data available from the BoT, during the month of November, domestic consumption picked up thanks to the positive sentiments towards the reopening of Thailand to foreign tourists. But with the ‘Test & Go’ system now suspended until further notice, the domestic consumption could take a further hit during at least the 1st quarter of 2022.

Also, with the lack of higher disposable income, the incentives of the Prayut Chan-o-cha government to stimulate spending via the various schemes be the ‘co-payment’ or ‘travel together’ are unlikely to have a major impact, economist say.


The only saving grace to the economic recovery is likely to be the rise in exports, thanks to the weaking Thai baht which is now trading at around 33.65 to the US Dollar.

The data from the BoT shows that for the month of November 2021, the Thai exports increased following the recovery of trading partners’ demand while the supply disruption problems gradually subsided.

The central bank said that the value of merchandise exports, after seasonal adjustment, increased from the previous month as trading partners’ economies recovered. Meanwhile, foreign tourist figures increased after the re-opening of the country; however, it remained low. The current account registered a small surplus due to a lower deficit in the net service, income, and transfers while the trade balance displayed a larger surplus.

Outlook for 2022

Despite the positive numbers seen in November and possibly in December, Thailand’s economic outlook for 2022 does not look promising.

The continued sell off on the equity markets by foreigners in 2021 is likely to continue into 2022 as no major impetus is visible yet for the investors to return. During 2021 foreign investors were net sellers of more than 48-billion-baht worth of equities on the Stock Exchange of Thailand (SET) and this is after they had sold 264.38-billion-baht worth of equities in 2020.

The lack of policies, instable government, and outbreak of new variants of the Covid-19 virus are all taking a toll on the country’s economic growth prospects.

Despite the 70% vaccination rate the outbreak of the Omicron variant is likely to put more strain on the medical system and the economy overall and with these possible scenarios it is likely that the fear by BoT Governor – Sethaput Suthiwartnarueput, is not something that should be taken lightly.

Dr. Sethaput has said in various forums that further outbreak of new variants could possibly derail the economy and the therefore the central bank has to put its priorities of ‘maintaining price stability, support economic growth, and preserving the financial stability’.


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