BANGKOK: Deputy Prime Minister Somkid, however, did warn that the Thai economy needs to get back to work as soon as possible. He said the longer the shutdown continues, the more challenging it will be to effect a recovery.

Thailand is facing its biggest economic contraction since the Asian financial crisis of 1997. The lights are out and doors shut on the country’s famous tourist venues. Businesses nationwide are closed as the government urges the public to stay at home. On Thursday, the country’s Deputy Prime Minister for the Economy, Somkid Jatusripitak, indicated that he was working on the biggest stimulus package yet, raising the prospect of an emergency decree to allow for borrowing. He told the press there was no limit on the extent of the package. 

Deputy Prime Minister for the Economy, Somkid Jatusripitak said on Thursday after meeting with the Bank of Thailand Governor and the Finance Minister that he was considering a larger economic stimulus package and that an emergency decree may be used to borrow money to deal with the crisis.

Thailand’s Deputy Prime Minister Somkid Jatusripitak on Thursday told Reuters that most economic activity in the kingdom had halted as the government and the public focus for now on fighting the Covid 19 virus.

His comments came as he announced that the government may issue an emergency decree to allow for increased borrowing to fund a giant stimulus package to keep the economy ticking over for the next 2 to 3 months.

Remarks came after meeting Bank of Thailand Governor and Finance Minister on Thursday

Mr Somkid’s remarks came after meeting with Thailand’s finance minister and the governor of the Bank of Thailand.

The deputy PM declined to comment on the extent of the new package but confirmed it would be more than ฿200 billion saying there was no limit given the extent of the challenge and the strength of the Thai government’s finances.

He was bullish about the eventual size of the package and borrowed funds which may be deployed. ‘The figures are no limitation for the finance ministry,’ he disclosed. 

Bank of Thailand keeps interest rates unchanged

In recent days, the Bank of Thailand’s monetary policy committee meeting voted by 4 to 2 not to alter interest rates, for now, defying the market expectation of a further 25 points cut from an already historic low of 0.75% to 0.5%.

Many economic analysts such as Tim Leelahaphan of Standard Chartered Bank have predicted further cuts this year suggesting that two more cuts, bringing the rate to 0.25%, are likely.

However, most observers agree that given the scale and nature of the current emergency, monetary policy is bound to have a very negligible effect on the economy’s performance at this point.

Tourism doors now closed with a ban on foreigners

This week, the Bank of Thailand also confirmed that it sees the Thai economy contracting sharply in 2020 by at least 5.3%.

It notes that tourism has declined so far by up to 98% as the country in recent days has closed its borders to foreigners altogether under a state of emergency order. 

Bank predicts only 15 million tourists for 2020

The bank is predicting only 15 million tourists this year and also a seismic fall in domestic economic activity which is also in the process of being shuttered as the government ramps up its isolation measures.

The extent and impact of this, of course, will be dependent on the trend in infections reported in the coming weeks.

Financial system is strong as unemployment soars

The Thai central bank has emphasised that Thailand’s financial system is strong and capable of meeting the challenge with the temporary shutdown of economic activity which will see millions temporarily out of work.

The government on Tuesday announced measures to assist employees within the social security system at up to 50% of their salary.

Self-employed traders and workers can seek government assistance of up to ฿5,000 per month. 

Somkid warns that an extended shutdown to fight off the virus risks a more ‘difficult’ recovery

Mr Somkid has warned, nonetheless, that the government must find a way to get the Thai economy back up and running as soon as possible.

He warns that an extended shutdown will make a recovery and the prospect of future growth a more challenging prospect.

‘The government must try to end the outbreak as soon as possible, so the economy can quickly recover. The later, the more difficult,’ he explained.

Honda closes its two car plants in the kingdom until April 30th asking workers to go home and self isolate

On Thursday, Honda announced the closure of its vehicle production facilities in Thailand from March 27th to April 30th. 

The Japanese manufacturer has two plants in Thailand in Ayutthaya and Prachinburi provinces.

Management at the company encouraged workers to return home safely and self isolate to ward off the coronavirus.

Biggest challenge since the 1997 Asian Financial Crisis

The current crisis is the biggest challenge to Thailand since the Asian financial crisis of 1997 and its full extent is, as yet, still unknown.

It will depend on the course of the virus in the United States which still governs the direction of the world economy and the prospect of any recovery in Europe.

Thailand’s biggest export market and largest trade partner, China, has not yet returned to normal after 80% of its production was shut down in efforts to defeat the spread of Covid 19.

Economy may wind down even further

For now, Thailand is only beginning its fight against the virus with infections predicted to rise further in the coming weeks.

Already, economic activity has significantly wound down with all non-essential retail outlets shut.

It may yet decrease further.

On Friday, 91 new infections were announced and 1 more death bringing the total number to 1,136. 

The Supreme Commander of the Thai Armed Forces, General Pornpipat Benyasri, who is now responsible for security matters in the kingdom, warned that if the number of infections continues to rise, then a 24-hour curfew even during daylight hours would become inevitable.

Further reading:

Economist warns economy needs ‘blanket’ fiscal support and a ‘big problem’ if the virus effect persists

Thailand faces lockdown if Phase 3 breaks out as the numbers infected more than treble in 1 week

UK Ambassador warns that links with home may be disrupted for many months as Thailand closes

Thai government responds with targeted stimulus plans to help the economy through the virus crisis