This week, a leading travel industry insider revealed that cancellations from Japanese tour groups are running at 80% as the Chinese market is still effectively closed off due to the virus.
A senior tourism industry figure has said that visitor numbers from Japan may contract by 80% in the coming weeks as the budget airline Jetstar cut back its flights to Thailand from Australia. It is still difficult to quantify the real impact of the coronavirus on the overall Thai economy. Days ago, Thailand’s tourism minister said that the loss could be as much as 50% of the tourist trade for the first half of the year with different analysts suggesting losses of ฿170 billion to ฿250 billion. A senior Bank of Thailand official predicts that overall economic growth will be in the order of 1% for the first quarter with no more than 2% for 2020.
Jetstar, the low fares airline run by Qantas Airlines in Australia, has announced that it is cutting back flight to Thailand until the end of May.
The company’s chief executive Alan Joyce said the airline was cutting flights to several Southeast Asian countries in response to market demand but stands ready to ratchet up its services if the market picks up in the event of the coronavirus being brought under control and the outlook improving.
It is the same story for Thailand’s travel and tourism industry which, although reeling from the outbreak, is moving to adjust its services and plan ahead even as operators face a growing number of requests for refunds from both outbound and inbound tourists.
80% of inbound Japanese tours cancelled
The latest market to be hit severely is Japan.
This week, it was revealed that 80% of inbound tourist groups had cancelled their trips to Thailand.
The president of the Thai-Japan Tourism Association also confirmed that Thai tourism to Japan was off by 20% at the moment following travel advisories from the Thai government in respect of both Japan and Singapore.
Coronavirus impact far more severe than SARs
The full extent of the coronavirus impact on the already fragile economy will not be known for some time as authorities both in Thailand and China as well as other impacted countries focus their attention on containing the outbreak which is now already had a far more wide-ranging impact than the SARS outbreak of 2003.
Not only are the number of infections and deaths higher but the virus is more unpredictable albeit with a lower mortality rate.
The outbreak is highly damaging to the tourist industry and industrial economy across Asia including Thailand that is far bigger as well as more integrated and sophisticated than it was in 2003.
China cranks its $14 trillion economy back to life
In China, the epicentre of the crisis and where authorities are still publishing increases in infections and deaths, the challenge for authorities there is to manage the outbreak as the $14 trillion Chinese economy which had, at one point, been closed down in vast expanses of the communist country, comes to life again.
Impact of the coronavirus on US financial market may be delayed despite buoyancy since January
Many experts are surprised that the financial markets in the United States have not been more severely impacted.
President Trump, of course, has promised that the United States will emerge as a winner out of the crisis but many large US firms have advanced supply chains and investment in China.
Nike, the sportswear company, for instance, has no less than 110 Chinese factories while Apple’s supply chain across the world including Foxconn in China involved over 770 enterprises.
It has been suggested that this may simply be market shortsightedness and that as the real financial impact of what has happened is revealed in the coming months, it may be a different story.
This could lead to a higher dollar and tighter conditions in the United States but, so far, this has not materialised.
With the Dow Jones up by 3% since January, the question is only being asked. Yale University’s, Stephen Roach, on Thursday warned that there may be a heavy reckoning down the line.
Baht steadily weakening is some welcome news for Thailand but trade surplus still high
In Thailand, the baht has been quietly and steadily weakening although market analyst Kobsidthi Silpacha of Kasikorn still estimates that it is 5.6% overvalued.
The problem for Thailand is that it still maintains a strong current account surplus even as exports have been driven back in the last year, the level of imports has been lowered further.
However, this year may see a slightly lower current account surplus in the order of $33 billion.
Status of safe haven now tarnished
The other factor is that Thailand’s position as a safe haven will now be significantly weakened given the longer-term impact of the coronavirus which will impact tourism into 2021 and has caused an overall lowering of confidence and sentiment towards the region stemming from the disruption.
Market confidence in China has been severely dented by this outbreak.
Thailand also scourged by drought and delayed spending due to now resolved budget bill debacle
For now, most analysts are monitoring the effect of the coronavirus on Thailand’s tourism sector but the country is also suffering from a drought crisis and a pullback in government expenditure and investment because of the earlier but now resolved budget bill debacle.
Thailand’s manufacturing industry has also been shaken by the Chinese shutdown and massive disruption in trade.
Senior Bank of Thailand official: growth of not more 1% for the opening quarter of 2020
On February 5th, the Bank of Thailand lowered its rates to the historic low of 1%.
Don Nakpornthab is the senior director of the bank for economics and policy and is usually quite prescient in his observations. Last year, he warned the market not to rule out lower interest rates when most analysts were doing just that.
He is currently predicting that Thailand’s GDP performance will certainly not be showing a growth figure in excess of 2% for 2020 and that the kingdom will be lucky to see the economy moving forward by 1% in this highly troubled first quarter.
Tourism is only 11% of Thailand’s GDP
He also confirmed that the tourism sector accounts for only 11% of Thailand’s GDP.
Long considered a reliable engine of growth for Thailand, its performance was questioned last year due to the highly valued baht despite figures that showed a record number of arrivals.
Losses range from ฿170 billion to ฿250 billion in the tourism sector although the minister warned of a loss of 50% in the first half speaking to industry leaders
This week, the Thai tourism minister frankly admitted that tourism for the first 6 months could be down by as much as 50%.
This follows the wipeout of Chinese tourists, thought to be down by over 80% and the market facing cancellations from all over the world because of the virus.
At the outset of the year, Thai tourism bosses estimated an income of ฿1.78 trillion from foreign tourists. So this would appear to indicate a far more severe impact although a lot can happen between now and the end of June.
The Tourism Department itself is currently only projecting a loss of ฿250 billion, a figure in itself higher than that estimated by GSB Bank Research this week which set it at ฿170 billion.
Tourist operators adapting to market realities
The difference in the figures can perhaps be explained by the resourcefulness, acumen and determination of this private sector industry to always adapt to more challenging conditions.
This has been seen with restaurants and hotels in tourist cities such as Pattaya and Phuket asking staff to report on alternate days or improvising new incoming sources and offers amid the crisis.
It is too early to measure the full extent of the loss, for now, businesses are too busy keeping the doors open while the government battles to keep the virus from advancing from the second human to human stage into what is called the third stage of widespread and calamitous infection such as that experienced in China.
Thankfully, for now, most observers and Thai authorities believe that prospect to be extremely unlikely as the health situation in the kingdom appears to be under control. The financial and economic health? That will be quite another matter.