Thai GDP unlikely to meet pre-pandemic levels until second half of 2023, analysts say

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In light of the Russia-Ukraine war, Thailand’s Covid-battered economy will not return to pre-pandemic levels until the second half of next year, economists said on Tuesday.

The Siam Commercial Bank’s Economic Intelligence Center (EIC) has reassessed the country’s gross domestic product (GDP) growth projection for 2022 to 2.7 per cent from the previous 3.2 per cent. 

Economists say that the cut was unavoidable considering the fallout from the Russia-Ukraine war. The conflict has led to worsening inflation and spiked energy prices that impaired household spending power and business sentiment in Thailand.

Yunyong Thaicharoen, the chief wholesale and wealth banking officer predicted that Thailand’s annual average headline inflation in 2022 will jump to a 14-year high at 4.9 per cent.

“Higher costs and falling profit margins will pressure firms to raise common product prices, passing on more rising costs to consumers,” Yunyong stressed. 

Since the Covid-19 pandemic ravaged the Thai economy, low-income households will likely suffer the most, economists say. Many workers throughout the country, especially those working in the tourism industry, became unemployed as the pandemic began to spread. The pandemic forced many people to return to jobs in agriculture, resulting in a sharp increase in household debt.

“Ballooning costs of living … will put more pressure on a rebound in spending of households who still grapple with economic scars,” Yunyong warned.

The EIC also trimmed its foreign arrival outlook for 2022. Given uncertainty from the Russia-Ukraine crisis and lingering concerns over the Covid-19 outbreak, the economic center brought down their estimates to 5.7 million from the previous estimate of 5.9 million. Thailand once recorded around 40 million foreign visitors pre-pandemic.

The EIC believes that the authorities should “play a vital role” in bolstering economic recovery and mitigating impacts on households, notably low-income groups. 

Yunyong pointed out that the recent relief packages aimed at reducing burdens on higher living costs are still inadequate when it comes to relieving financial pressure for low-income households. 

He also urged the Thai government to introduce more specific policies to directly help vulnerable groups, public transport, and logistics businesses who are suffering from rising fuel prices.

In 2021, the Thai GDP expanded by 1.6 per cent, rebounding from the Covid-induced contraction of 6.1 per cent in 2020. But the Ukraine-Russia war and new Covid outbreaks are worrying many economists like Yunyong throughout the country.

“Thailand will likely see a slow economic recovery as inflation continues to rise and hover high throughout 2022,” Yunyong concluded. 

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