> Pandemic steps to steer GDP outlook

Central bank sees potential for growth projection downgrade by up to 4 percentage points

Thailand’s GDP growth projection of 3.2% for this year could be downgraded by as much as four percentage points, depending on the government’s management of the latest outbreak, says the Bank of Thailand.

There are three scenarios that could cause the country’s economic growth outlook to waver between 1-4%, according to the central bank.

In the first scenario, the central bank forecasts the government would use the existing moderate measures, which excludes a nationwide lockdown in favour of area-based measures that are implemented for two months to contain the outbreak.

A reduction of 1 to 1.5 percentage points in GDP growth would be the outcome in this scenario, based on existing data, said Chayawadee Chai-Anant, senior director of the economic and policy department. This would result in a revised GDP growth projection of 1.7-2.2%.

If the government takes more stringent steps by adopting the nationwide lockdown policy used during the first wave of the pandemic, this scenario may better contain new infections, but it would derail economic activities and cause GDP to dip by 2-2.5 percentage points, said Ms Chayawadee. This would result in a revised GDP growth projection of 0.7-1.2%.

She said the central bank calculates a plunge of 3-4 percentage points in GDP in a worst-case scenario. This would happen if the existing moderate measures failed to contain new infections, resulting in the adoption of more stringent measures including a nationwide lockdown later to curb the outbreak. The Bank of Thailand estimates this would result in a revised growth projection of -0.8 to 0.2%.

Under the three scenarios, the central bank’s macroeconomic assessment is mainly based on the government’s measures to contain new infections and the effects on economic activities.

The government’s latest financial relief measures and vaccine development have not been taken into consideration.

“Several economic research houses have lowered their GDP growth forecasts for this year mainly due to the latest outbreak, and the central bank has a similar assessment. However, we need to evaluate more economic data and the direction of the Monetary Policy Committee before announcing the actual revision,” said Ms Chayawadee.

The new outbreak is expected to have less of an impact on economic activities compared with the first wave as there has not been another nationwide lockdown, while the government’s latest financial remedies may help sustain a recovery impetus, she said.

Vaccine development remains a key factor in building up consumer confidence, said Ms Chayawadee.

Vaccine development and the progress of Thailand’s vaccination timeline support the country’s reopening policy for foreign tourists and the recovery of the tourism industry, which is widely anticipated to take place in the second half of 2021, she said.

“Right now, we can see a light at the end of the tunnel, largely supported by vaccine development,” she said.

Hotels, passenger transport businesses and property suffered from the effects of the pandemic, said the bank.