The devaluation of the baht since the beginning of 2020 of over 5% cannot be underestimated. Amid the current crisis with the virus outbreak, the budget debacle and farm drought, some commentators and institutions are still predicting that Thailand’s economy may grow faster in 2020.

As the Thai government and even the Bank of Thailand move to assist firms impacted by the damage to the tourist industry caused by the Chinese coronavirus, there is some hope that the economy may benefit from the 5% drop in the value of the Thai baht since January. 

The Prime Minister at Suvarnabhumi Airport this week with Public Health Minister Anutin Charnvirakul and the Transport Minister Saksayam Chidchob. After coming down with the flu following the visit, the PM on Friday chaired a Council of Economic Ministers meeting where a programme of support for the tourism sector was agreed to be presented to the Thai cabinet on Tuesday. It comes as the Bank of Thailand is tipped to lower interest rates next week and the lower valued Thai baht is causing some economists to predict that the Thai economy can still grow this year at a faster rate.

The Centre of the Economic and Business Forecasting at the University of the Thai Chamber of Commerce has yet to revise downwards its predicted growth rate for 2020 even as it predicts hundreds of billions in losses for the tourism industry in different figures depending on whether China can contain the outbreak by March or May.

The Bank of Thailand could well lower interest rates in Thailand next week by 25 points bringing the borrowing rate to a historic low of 1% according to Kasikorn Bank’s economic research unit.

Kasikorn Research Centre said on Friday that it is expecting a further lowering of interest rates in March by 25 points or even a sharp cut of 50 points when the monetary policy unit of Thailand’s central bank meets on Wednesday, February 5th.

Relaxation in lending policy announced by the Bank of Thailand last week for credit cardholders

The prediction comes in the context of relaxation in the Bank of Thailand lending policies in recent weeks due to the coronavirus and other economic challenges.

Last week, that bank asked all credit card operators to temporarily lower the minimum payments on credit cards by up to 10% and encouraged banks under its supervision to take action to boost working capital available to businesses in Thailand, particularly those engaged in tourism.

Calls for grace period on principal repayments for firms impacted in the tourism sector 

The move was outlined by Ronadol Numnonda, the deputy governor of the Bank of Thailand for the stability of financial institutions. The bank called for a reduction in banks fees and a temporary relaxation of debt repayments in relation to outstanding loan principal amounts due.

Range of measures to be put to cabinet next week

On Friday, Thailand’s Council of Economic ministers met under the Chairmanship of the Prime Minister Prayut Chan ocha.

A range of measures were agreed designed to assist and support tourism sector operators, such as hotels, in what has developed into a crisis for the industry.

The measures discussed included delayed corporation tax payments and lower transport costs for the airline industry.

It is understood that these will be presented to the cabinet when it meets on Tuesday.

Governor of TAT says visitor numbers target has not yet been cut for 2020 as new markets sought

At the meeting, the Governor of the Tourism Authority of Thailand, Yutthasak Supasorn, however, said that his agency had not yet revised downwards its projected number for tourist arrivals in 2020 which it had set at 41.8 million at the start of the year alongside a projected income of ฿2.22 trillion.

He indicated that the authority would try to target new markets to make up for the loss in Chinese visitors.

TMB Bank predicts ฿100 billion loss

However, financial analysts have not been as reticent. TMB Analytics, the economic policy arm of TMB Bank, has predicted at least a drop of 2.4 million visitors in the first 6 months of the year, mostly Chinese visitors, and a loss of ฿100 billion in income. That is a 4.5% drop in income to the tourist industry.

The bank predicted that ฿70 billion will be lost to the hostelry and retail sector with nearly ฿29 billion lost to hotels and ฿19 billion to restaurants due to the impact of the present crisis caused by the coronavirus outbreak in China.

7 key provinces to be hardest hit

The bank detailed 7 areas most impacted by a loss of tourism from China and the aftereffects of the crisis on other tourist markets. They include Bangkok, Phuket, Chonburi, Phang Nga, Krabi, Surat Thani and Chiang Mai.

In all, 7,500 hotels and tourist establishments will be affected by the downturn with 4,763 of these being in the seven most popular provinces frequented by Chinese visitors.

Shock to the Chinese economy will also be felt worldwide and in Thailand in the export sector

Kasikorn Research Centre, in its assessment on Friday, noted that the coronavirus has caused a severe shock to the Chinese economy.

The bank points to the likelihood that Chinese economic growth will be severely impacted even though 2020 was already predicted to be a challenging year for the world’s second-largest economy.

It predicts that the outbreak, which has still not be brought under control, will slow down the prospects this year for overall global economic growth.

Rapid devaluation of the Thai baht seen in January

On the other side of the coin, the Thai baht has had its value depreciated markedly since the beginning of the year and most especially since the Chinese government cancelled all outbound tours to Thailand on January 24th.

It is now down over 5% since its highest point against the US dollar on the 31st December 2019.

Series of severe economic challenges and headaches already face Thai ministers in 2020

Thailand is also facing a crisis with the budget being delayed due to a Constitutional Court hearing to determine the legal implications of proxy voting within the House of Representatives.

Before the scale of the coronavirus crisis worsened this week, some government officials were indicating that this was an even bigger threat to the Thai economy which will see hundreds of billions in capital expenditure not being made available for key economic projects which will also have devastating knock-on effects.

Then, there is the problem of drought, particularly in central Thailand, which is already affecting farm output and agricultural exports.

Value of the baht shown to be the critical factor in the downturn of 2019 but may now drive an upturn 

Nevertheless, given the market devaluation of the baht, there are grounds for hope as this factor is thought to have wrought such devastation last year when the currency rose.

Some Thai economists still disagree vehemently with this premise, it should be noted.

Most analysts, though, including central bank officials, accept it was the critical factor in the downturn of 2019.

University of the Thai Chamber of Commerce sticking to 2.8% growth prediction for 2020

The Centre of Economic and Business Forecasting at the University of the Thai Chamber of Commerce this week said it had yet to rule out the prospect that Thailand can achieve its already predicted 2.8% growth rate this year.

At the same time, it predicts that the coronavirus will have a more severe impact on the economy than other forecasters.

Loss of ฿189.2 billion if the virus outbreak in China extends into May say economists at UTCC

In relation to tourism, it predicts that if the outbreak in China is brought under control by March than the loss to the Thai economy will be ฿117.3 billion. If it extends into May, that figure will rise to ฿189.2 billion.

One of the impacts will be on exports and world economic growth. It sees a loss of ฿15.5 billion in the shorter-term and up to ฿36.7 billion in the extended term to May.

Tourism employs up to 27% of the Thai workforce but the Thai baht is key to the export-led economy

In recent years, the extended Thai tourism sector is said to make up 15 to 20% of the Thai economy but it employs up to 27% of the working population.

It is a critical industry that generates cash flow and earnings for ordinary Thais feeding directly into Thailand’s huge and vitally important black economy.

While up to 70% of Thailand’s economy is export-led including tourism, this is highly dependent on the value of the Thai baht.

The effective devaluation of the baht by 5% in the last month is bound to lift the country’s export performance at some stage in 2020 if the currency continues to move in the right direction.

Challenge to contain the outbreak in Thailand

The biggest challenge now is containing this viral outbreak within Thailand which has the potential not only to damage the rest of the tourism industry in short order but also to damage it in the long term and the economy on a broader scale.

The extent of the current outbreak in China is still not quite clear except we do know that it has already impacted the communist country’s wider economy and indeed its reputation. 

Further reading:

Taxi driver is infected by Chinese tourist as Public Health Minister supports scrapping visa on arrival

Baht has retreated by 4.8% against the US dollar since the deadly coronavirus outbreak took hold

Disease control doctor warns a virus outbreak is ‘highly possible’ in popular Thai tourist areas

Minister denies the government is prioritising tourism over safety tackling the Chinese corona virus

Government says virus under control in Thailand but the infection rate in China is worrying medical experts