Thailand economy expected to recover in Q1/2022: TU-RAC

Asst Prof Suthikorn Kingkaew, a research project manager at Thammasat University Research and Consultancy Institute (TU-RAC), revealed on Tuesday (November 16) that over the past two years, Thailand had been impacted by the Covid-19 pandemic in various perspectives, including economy, society, and livelihood, due to heavy reliance on other countries for revenue, such as tourism, exports, and inward investment.

He said a research project was initiated to study the economic and social impacts of Covid-19 and the development of domestic vaccine production in Thailand, along with the government’s policy response, as well as to forecast economic and social implications following vaccine rollouts and investigate long-term economic benefits and health security brought about by a domestic Covid-19 vaccine production base. 

"According to the study, the Covid-19 pandemic was responsible for a 6.1 per cent decline in the gross domestic product (GDP) in 2020 compared to 2019. Starting from Q1/2020, Covid-19 caused the industrial sector and the service sector, especially in the spheres of accommodation, food services, transportation, and warehousing, to shrink by 36.6 per cent and 21 per cent, respectively, while also triggering a 19.4 per cent shrinkage in the export sector," he said.

The study also found that Covid-19 impacted Thailand’s economy and society in eight major areas, namely:

• Public debt: Thailand’s public debt-to-GDP ratio soared significantly to 51.83 per cent in 2020 and is expected to keep increasing to 55.59 per cent in 2021, approaching the fiscal sustainability framework, which caps the public debt ceiling at 60 per cent. 
• Private debt: This type of debt, which refers to private loans of non-financial businesses, began increasing during the onset of the Covid-19 pandemic and was taken on for business continuity, especially during the third wave in Q2/2021. Therefore, the value of newly-issued debt instruments rose by 61.90 per cent compared to the previous quarter, with more valued at over 400,000 million baht expected to be issued in the second half of 2021.
• Household debt: In Q2/2020, the household debt stood at 13.59 trillion baht and steadily rose to 14.13 trillion baht in Q1/2021. Borrowers consisted of those taking out loans for real estate, housing, and cars and those taking out loans to improve business liquidity and cover daily expenses.
• Tourism: In 2020, Thailand’s tourism revenue shrank to merely 0.8 trillion baht, a 72 per cent decrease compared to the 3 trillion baht of the previous year, while the number of international tourists totalled only 6.7 million in comparison to 40 million in 2019. In July, Phuket Sandbox successfully drew some visitors to Thailand, but the number was limited compared to the normal situation. 
• Unemployment: The number of unemployed persons was more than 700,000 throughout the pandemic, which rose from approximately 300,000 in the pre-pandemic period. 
• Liquidated businesses: In 2020, a total of 20,920 companies, with a registered capital of 91,859 million baht combined, went out of business. The top three categories of liquidated businesses were construction, real estate, and restaurants. 
• Factories: In 2020, there were 2,633 new factories, amounting to an investment of 171,054 million baht combined and 86,797 workers hired. These numbers represent a decline compared to the previous year, in which the number of new factories was 3,175, the amount of investment combined was 301,418 million baht, and the number of workers hired was 96,492. In addition, a total of 716 factories underwent liquidation. The top five categories of liquidated factories were plastics, plant products, metal products, food, and non-metal products. 
• Shifting ways of life: Covid-19 precipitated the arrival of a cashless society and spurred electronic transactions and online businesses, as well as ushering in new formats of working, such as working from home. As a result, e-commerce grew by as much as 80 per cent from the previous year, equivalent to approximately 300,000 million baht in value. In comparison, in-store shopping shrank by 11 per cent in the same year, reflecting a clear shift in consumer behavior. In addition, consumers also began taking better care of their health and the health of those around them, reducing interactions, observing physical distancing, and wearing face masks.

Suthikorn went on to say that the government’s procurement plan for this year consists primarily of three vaccines, namely AstraZeneca, Sinovac, and Pfizer, totalling 127.1 million doses; once alternative vaccines are taken into account, the total number is 179.1 million doses. 

He said the government has also aimed to administer 100 million doses by the end of 2021 to achieve herd immunity, speed up the reopening of tourist cities, and ultimately fully reopen the country in the next phase. 

It is projected that Thailand will be able to manufacture a total of 260-295 million doses of Covid-19 vaccines in 2022, he added.

“Herd immunity can be achieved if 70 per cent of the population is vaccinated – equivalent to 100 million doses administered – as targeted; at present, a total of vaccinated people in Thailand is 85 million doses (as of November 14, 2021). This will play a significant role in Thailand’s economic recovery and return to normalcy, as evident in several countries where vaccination rates directly impact the economy, such as the United States, Israel, China, and the United Arab Emirates, which have seen a rapid economic recovery. As for Thailand, its ability to produce vaccines by itself and serve as a production base for Southeast Asia holds the key to resolving this crisis and will contribute to the long-term health security of its population and reduce reliance on imports. Furthermore, the manufacturing knowledge and technology transfer will also equip Thailand for new diseases in the future,” added Suthikorn.

Suthikorn said if vaccine management, however, proceeds as planned, the numbers of new cases and deaths should drop to 2,500 and 40 respectively by December 2021. This decline will affect the economy in Q4/2021, with the number of international visitors expected to increase by almost 300,000. 

He added that such numbers will drive the domestic economy, boosting the capacity utilisation of the industrial sector by 10.28 per cent to 70.39 and causing the private investment index to rise by 6.95 per cent while reducing the total number of unemployed in the social security system by about 450,000 or 32.23 per cent year on year. 

"Taking into consideration various economic factors, such as the government’s economic stimulus programs and the growth trend of the global economy, if new cases dwindle to near zero by late March 2022, the number of international tourists will increase by over 1.1 million in Q1/2022, the capacity utilization of the industrial sector will increase by 11.26 per cent, the private investment index will increase by 39.29 per cent, and the number of unemployed insured members of the social security system will reduce by over 70,000 compared to the same period of the previous year. It is also forecast that in 2022, the economy will grow 3.9 per cent," concluded Suthikorn.