Worse to come in Q2 for Thai economy, says central bank
THE Thai economy deteriorated in the first quarter of this year, with worse to come in the second quarter, the Bank of Thailand (BoT) – its central bank – has warned.
Economic indicators for March showed a decline from February, said senior BoT director Don Nakornthab.
Exports, private investment, household consumption and tourism were hit hard in the first quarter as the spread of the Covid-19 became more acute, he said.
Export volume in March fell by 2.2 per cent year-on-year. Excluding gold, the value of exports contracted by 6.5 per cent, largely due to weak of global demand as a result of the Covid-19 fallout, he said.
BoT export statistics differ from those of the Ministry of Commerce, which rely on Customs Department figures, he said. The BoT does not count tanks shipped to Thailand for military exercises, or the return of leased aircraft to their owners abroad by Thai airlines. Customs Department statistics registered export growth of 4.17 per cent in March.
However, after severe contraction in February, the value of imports in March expanded by 4.4 per cent year-on-year, partly due to China reopening businesses. Excluding gold, imports expanded by 1.3 per cent, said Don.
Private consumption dropped from March last year in almost all spending categories, as supporting factors including household income, employment and consumer confidence weakened.
The Manufacturing Production Index (MPI) contracted by 11.2 per cent year-on-year, pressured by weakening domestic and external demand, and drought in Thailand.
Private investment indicators contracted sharply from the same period last year, with the private investment index fell 7.8 per cent in March. Large numbers of workers also lost their jobs.
Farmers hit by drought saw their real income decline, leading to a drop in household consumption. Tourists arrivals in March plunged by 76.4 per cent year-on-year to 819,000, after falling 42 per cent in February.
Tourist arrivals last month could see a 99 per cent yearon-year nosedive, Don warned, amid government lockdown restrictions including a ban on incoming flights until the end of this month, mandatory quarantine for all arrivals, and curfew.
Only government spending remained positive in March, he said. Public spending (excluding transfers) rose for the first time in five months, due to disbursement of the 2020 budget.
“Contraction of the economy in the first quarter from January to March brings expectations of more of the same in
April followed by a much larger contraction in the whole of the second quarter from April to June,” he warned.
The one trillion baht ($31 billion) government stimulus package, worth six per cent of gross domestic product (GDP), should help shore up the economy this year and next. Meanwhile BoT’s loan facility to support small and medium-sized businesses is also relatively large, at three per cent of GDP.
Though the large stimulus packages will aid the economy, the BoT still forecasts a 5.3 per cent drop in GDP this year before growth returns next year.
The challenge is how to channel the stimulus funds quickly to those who need them, said Don.
He predicted a U- or Vshaped recovery, adding that an L-shaped economic scenario was possible but unlikely.
Thailand’s recovery would largely depend on how the global economy rebounded. The World Trade Organisation ( WTO) forecasts global GDP will sink by 2.5 per cent – or 8.8 per cent in the worst case scenario – this year, before rebounding to grow at 5.9-7.4 per cent next year.
The WTO also projected world trade volume will fall by 12.9 per cent, or 31.9 per cent in the worst case scenario, before recovering next year to grow between 21.3 and 24 per cent.