Thailand risks first double-dip recession since 1998 crisis

THAILAND will likely be the worst economic performer in Southeast Asia this year, with economists continuing to slash the country’s growth forecast amid surging Covid-19 infections, mounting political tensions and fading hopes for a tourism revival.

The Finance Ministry on Thursday cut its 2021 gross domestic product forecast to 1.3 percent growth, from the 2.3 percent it expected in April. With new Covid infections and deaths continually breaking records since the latest surge began in April, some economists are flagging the possibility of a technical recession in the second half of the year—or even a second straight annual contraction, something the country hasn’t seen since the Asian Financial Crisis more than two decades ago.

According to the latest weighted average of 36 economists surveyed by Bloomberg, gross domestic product should grow 1.8 percent this year. That’s particularly weak considering it’s a comparison to last year, when

Thailand’s economy contracted 6.1 percent, the most in more than two decades.

“We see Thailand as a laggard in the region, penciling in the lowest GDP growth forecasts in Asean for both 2021 and 2022,” said Charnon Boonnuch, an economist at Nomura Holdings Inc. in Singapore. “Our forecast implies economic output will not return to pre-covid levels before the third quarter of 2022, the slowest in Asean, partly reflecting the high dependence on foreign tourists.”

Bangkok and 12 other provinces, which account for more than half of the Thai economy, have been under lockdown and curfew since last week as the Delta variant threatens to overwhelm the country’s public health system. The Bank of Thailand has said the outbreak could shave as much as two percentage points off this year’s GDP if current measures fail to quell it and the pandemic endures for the rest of the year.

The Finance Ministry’s new forecast, which carries a range of 0.8 percent to 1.8 percent, assumes Thailand will receive 300,000 tourists this year, a fall of 96 percent from last year. The ministry also expects the current lockdown to last just one month, and sees the outbreak peaking in August.

“We expect that exports and government spending will help support the economy and should prevent GDP shrinkage this year,” said Kulaya Tantitemit, head of the ministry’s Fiscal Policy Office. The ministry raised this year’s export forecast to 16.6 percent growth, from 11 percent predicted in April, as global demand recovers.

The Thai baht is down 8.9 percent against the dollar so far this year, the worst performer among Asian currencies tracked by Bloomberg. The local currency was little changed at 32.875 to the dollar as of 12:54 p.m. local time. The ministry forecast the baht’s average level for the year at 31.48 per dollar. “Thailand ’s worsening coronavirus outbreak looks set to push the economy into a double-dip recession in the third quarter, as well as a back-to-back yearly contraction for 2021. The high-frequency indicators tracked by Bloomberg Economics show no let up in the country’s weakening recovery momentum. We now see significant risks that the Thai economy will shrink further in 2021, compared with our previous forecast of a 2.3 percent expansion,” said Tamara Mast Henderson, Bloomberg Asean economist.

Thailand reported 17,669 new infections and 165 deaths Thursday, both single-day records. Total cases rose to 561,030, of which 95 percent have come since the latest wave began in April, official data show. The Health Ministry expects the current wave to begin easing by October.

Thailand has administered about

16 million vaccine doses, enough to cover about 11 percent of the population,

according to the Bloomberg Covid-19 Vaccine Tracker. The central bank, which previously expected the country to achieve herd immunity in the first half of next year, now says that milestone won’t be reached until

after 2022. “There’s now increasing chatter that the Thai economy will contract again this year,” said Maria Lapiz, managing director of Maybank Kim Eng Securities Thailand. “There’s no reason for optimism.”

The economic and health crises coincide with a rise in political unrest. The pro-democracy movement has returned to the streets in Bangkok after a six-month lull, with near-daily gatherings organized by

different groups since June 24.

“We are in a severe crisis and our health system is on the brink of collapse,” said Burin Adulwattana, chief economist at Bangkok Bank Pcl. “The compensation program is inadequate. More and more people are losing faith with the government, which led some of them to take to the streets. This can undermine the government’s stability and further damage confidence.”