INDUSTRY
Sixteen years after southern Thailand was hit by a tsunami that killed 5,395 people, including 2,000 foreign tourists, a new disaster has not only claimed vast numbers of lives worldwide, but also ravaged national economies.
In addition to being a major health crisis, the pandemic has been dubbed an “economic tsunami”, damaging national economies and causing many Thai businesses to abruptly switch strategies instead of opting for expansion or adopting a cautious approach. The economy was deemed sluggish prior to the initial Covid19 outbreak.
While sectors such as exports, car manufacturing and the medical sector have seen signs of growth, other segments face an uncertain future in the second half this year, with many scaling down plans, focusing only on survival and the country’s plans for mass vaccination.
So far, Thailand has faced three waves of the pandemic. The first outbreak emerged at the beginning of last year and the second late last year. The latest outbreak emerged in April this year, dealing another blow to the already shattered economy.
Some observers have suggested the third wave of the pandemic has generated Thailand’s worst economic crisis since the 1997 Asian financial crisis.
The government is speeding up its Covid19 vaccine rollout after being criticised for a slow start back in late February. It also launched a series of relief packages to help households and businesses suffering from the economic impact of the pandemic.
UNCERTAIN FUTURE
The stated goal of the government’s mass vaccination scheme is to reach herd immunity, which it estimates at 70% of the population being inoculated. When the country will reach that level is a wild guess at best, making it difficult for many businesses to plan for the future, according to The Federation of Thai Industries (FTI).
When the pandemic first hit Thailand early last year, companies across the industrial sector adopted various measures to cope with the impact, ranging from remote work to furloughs or reducing their staff, and even temporarily shutting down operations.
Companies are trying to adjust to the disruptions caused by the virus, building new working environments that meet
higher hygienic standards to shield their staff against infections and save their businesses.
The pandemic also led companies to develop omnichannel retailing, merging the online and offline worlds together to provide goods and services in shops and directly to homes.
“The business sector has tried everything. But, in the face of the third wave, we can’t tell which way to go because some measures are not working well this time,” said FTI chairman Supant Mongkolsuthree.
The FTI believes the only solution is the state’s inoculation programme.
Mr Supant said vaccines are the key in helping Thailand fight against the pandemic. He stressed at least 70% of the population must be vaccinated.
“A rate of 70% of the population inoculated should be effective enough to significantly reduce infection rates,” said Mr Supant.
Mass vaccinations should also ease the stress on the economy. The third wave alone could cause economic losses of around 100 billion baht a month, according to the FTI’s estimate.
He said if the mass vaccination scheme goes smoothly, the government could halt economic losses and revive business activity.
“Vaccine distribution may face delays as Thailand faces shortages, leading many provinces to be unable to provide jabs,” said Mr Supant.
The FTI wants the state, business and civic sectors to apply the lessons learned during the first two waves to better manage economic and public health situations during the ongoing third wave.
The government must keep on renewing or initiating economic stimulus packages to improve business confidence, while the manufacturing sector needs to use all its resources to maintain operations through the end of the crisis, he said.
Some businesses, especially small and medium-sized enterprises (SMEs), are struggling, said Mr Supant.
“That’s why many prefer to stay still and assess the situation day-by-day,” he said.
SLOW RECOVERY
What seems more certain is unpleasant economic prospects in the second half this year, said the FTI.
Economic recovery depends on many factors. The vaccination scheme is one of them, but it is too early to assess that programme, said the FTI.
The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) downgraded its GDP growth forecast to 0.5-2% in 2021 from 1.5-3%, largely because of the impact of the third wave.
Rising unemployment is a major concern over the next six months because many industries that depend on domestic sales will face a liquidity shortage and may have to stop operations, according to the FTI.
SMEs continue to face obstacles in obtaining loans from financial institutions during the pandemic.
Though the Bank of Thailand asked commercial banks to grant more loans to needy enterprises, banks have remained cautious, reluctant to relax their selective criteria.
“They tend to give loans to businesses that can continue operations, not those with bad debt records due to Covid-19 outbreaks,” said Mr Supant.
Lower consumption among the population also looks certain to affect GDP.
“People still had money to spend after the first two outbreaks, but some have almost no savings left now,” he said.
For consumers with higher income levels, Mr Supant suggested many were afraid to spend because they see no signs of economic recovery in the second half this year.
On a brighter note, some sectors recognised opportunities to thrive despite the pandemic. For example, medical and healthcare businesses look set to emerge from the crisis in good shape.
“This sector continues to produce more products to serve hospital personnel as well as young and old people who need certain items to prevent spread of Covid-19,” he said.
JSCCIB has a positive export outlook for Thailand as a result of a global economic recovery, driven mainly by the US and China. It expects exports will expand by 5-7% this year, up from 4-6%.
“It seems exports is the only economic engine to drive Thailand at this moment,” said Mr Supant.
Surapong Paisitpatanapong, vice-chairman and spokesman for the FTI’s automotive club, said Thailand recently recorded the highest level of car exports since the pandemic hit the global market.
In March this year, the country shipped 104,506 cars, an increase of 31.5% year-on-year.
Domestic car sales in the same month increased by 25.5% year-on-year to 74,925 units because of the state’s economic stimulus packages and sales promotions during the Bangkok International Motor Show.
If the mass vaccination scheme goes smoothly, the government could halt economic losses and revive business activity.