Thailand’s domestic economy is expected to decelerate in the third quarter of 2021 due to the worsening Covid-19 outbreaks and the discovery of new mutant variants, such as Delta, in the country, particularly in Bangkok, Krungsri Research estimated.
According to the report, overall economic demand remained sluggish since June but the domestic economy was somewhat fulfilled by exports. The export value has hit 46.1%YoY, which is significantly driven by the financial recovery of trading partners and the uptrend of the global electronic cycle. The country’s exports, therefore, have potentially sustained some industrial productions during weak domestic demand due to Covid-19.
The Private Consumption Index recorded in June was slightly improved from the previous month (+1.2% MoM (month over month) but still weak in general, which is also in line with the lowest-hit rates of consumer confidence.
Due to the government control measures relating to construction workers, the private investment rate in the construction sectors was declined while the other business investment rates were relatively stable from the previous month, slightly up to 2 percent.
Krungsri Research also expects GDP in the second quarter to shrink from -0.6% QoQ (quarter over quarter), following the occurrence of the third wave of the Covid-19 pandemic in early April. The domestic economy was forecast to face a constant downfall in the third quarter as various new mutants were found in the country.
The third outbreak has substantially affected economic activities, domestic tourism, international travel, the nighttime economy with closures of nightlife for over four months country-wide so far, and the number of foreign tourists arriving in Thailand. The government measures to cope with the outbreak, as well as the clusters found in the manufacturing businesses, are causing several economic activities to be disrupted. The domestic economy in the third quarter, therefore, may likely be more vulnerable and may lead to a recession more so than in the second quarter.
Concerns have also arisen for the export sector, as many major factories have been hit by Covid-19 outbreaks, forcing governors to close or restrict them for weeks at a time, concerning investors and business owners.
The reports additionally indicated that the GDP this year is expected to only grow by 1.2 percent, from the previously expected by 2.0%, if the outbreak becomes more severe and longer than expected. The number of foreign tourists is expected to be only about two hundred and ten thousand overall, from a previous estimate of 330,000. In 2019, as a comparison, Thailand welcomed almost 40 million tourists, a record-breaking year, just before Covid-19.
The only hope for the Thai economy this year, according to Krungsri research, is the reopening of economic activities in developed countries, which are Thailand’s important trading partners. This will support Thailand’s export value to grow by 15 percent and hopefully will help the Thai economy, in general, to improve in the fourth quarter. Krungsri expects, unfortunately, widespread domestic disruptions due to Covid-19 for the rest of the third quarter and possibly into the fourth.
However, the research center concluded that the uncertainty in the vaccine procurement in Thailand, the effectiveness of vaccines, and the lockdown measures are playing crucial roles in the economic recovery and need to be monitored in the future.
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