The economic intelligence unit of one of Thailand’s major banks now predicts a 7.3% contraction in the Thai economy and at least a 72% dip in tourist numbers as political tensions within the ruling Palang Pracharat Party threaten to impinge on the government’s response to the crisis. A poll recently published over the weekend showed support for the coalition government among the public has nearly halved to just more than one in five.

The outlook for the Thai economy is getting darker as the latest economic prognosis from the research arm of Siam Commercial Bank shows that the impact of the Covid 19 lockdown measures on the Thai economy has been more severe than expected. There are also fears that current political moves embroiling the government’s economic team may further aggravate the situation.

Key representatives of Thailand economic ministries and agencies meet this week to discuss the economy. It follows a report from Siam Commercial Bank predicting a contraction by over 7% with the economy a lot more severely impacted than expected by Covid 19 shutdown measures. The meeting, called by economics boss and Deputy Prime Minister, Somkid Jatusripitak (left), comes amid a swirling political heave reportedly led by Deputy Prime Minister Prawit Wongsuwan (centre) which aims to unseat the Minister of Finance Uttama Savanayana and current leader of the Palang Pracharat Party and replace him with Deputy PM Wongsuwan.

The research arm of one of Thailand’s leading banks Siam Commercial Bank is predicting that the Thai economy will contract by 7.3% this year with a 12% contraction seen in the second quarter.

However, it also sees the contraction of the economy continuing into the third and fourth quarters with concern being expressed for the tourism sector and exports, which they forecast will contract by at least 10.4% for the year.

Tourism numbers at least down by 72% in 2020 even if ‘bridges’ or ‘bubble’ concept works well

The economic research unit at Siam Commercial Bank also sees tourism numbers falling by 72% this year to 11 million visitors, most of whom have already arrived in January and February.

Even so, this figure is dependent on the strategy being proposed by the government and the tourism authority involving the introduction of travel bridges or bubbles to selectively encourage limited tourism this year from October.

Tourism contraction could be over 81%

If this initiative were to fail or a second wave of the Covid 19 virus emerges, then the Siam Bank’s Economic Intelligence Centre is predicting an 81.4% contraction in tourism numbers, nearly all of which have already arrived in the first quarter before inbound tourism was brought to a halt on April 4th by an order to cancel all inbound passenger flights issued by Thailand’s Civil Aviation Authority.

Yunyong Thaicharoen is the chief economist with the Economic Intelligence Centre (EIC) of the bank.

He pointed out that the hardest hit sectors by this pandemic induced economic crash have been tourism, automotive and property development.

The least affected sector was that of telecommunications which saw a rise in demand requiring extra capacity.

Fears for 6.6 million jobs as Thailand looks like it is heading for a U shaped recovery in 2022

He feared for the jobs of 3.9 million self-employed people linked with Thailand’s tourism industry and a further 2.7 million working for small businesses in the kingdom which have been very badly hit.

Mr Yunyong pointed to May’s inflation figures which show inflation at an 11 year low and warned that Thailand could be entering a deflationary period.

He also expressed the view that the country, which had already entered recession before the nationwide government lockdown, is facing a U shaped recovery to pre-pandemic levels of economic activity sometime in 2022.

Quality of bank loans may be eroded with consequent danger to financial stability says bank unit

Mr Yunyong also warned about the ability of firms and businesses to pay debts and meet commitments in the coming months and observed that the quality of loans held by Thai banks was set to be eroded.

This raises the spectre and potential for financial instability. 

Even before this crisis began, at the end of last year, the Governor of the Bank of Thailand, Veerathai Santiprabhob, had expressed concerns about the high level of household debt in Thailand.

59% of Thai homes had financial liquidity for 3 months with a further 16% living on a month to month basis before this crisis began

In this current study of the economy in the depth of the virus crisis, Mr Yunyong revealed this week that up to 59% of Thai households or 21.8 million had the financial ability, at the outset, to cope for three months without income while nearly 16% or 5.8 million households survived just on a month to month basis with a median income of less than ฿30,000.

Deputy PM Somkid Jatusripitak to meet economic advisors and agencies this week on the economy

This comes as the Deputy Prime Minister Somkid Jatusripitak and the besieged Minister of Finance Uttama Savanayana prepare on Monday to meet financial experts from the Bank of Thailand, Ministry of Finance, Stock Exchange and the Economic and Social Development Council to review the government’s current range of supports for the economy.

Country now kept afloat by the public purse

Recent economic data has shown that the Thai economy, which relies heavily on exports and tourism, is now relying massively on government expenditure to keep itself afloat.

Mr Yunyong warned that the pandemic’s effect on the Thai economy was turning out to be more severe than had been expected at the outset.

Political heave may see changes in government and its economic leadership during this critical time

Meanwhile, political developments are also threatening to disrupt Thailand’s economic leadership during this critical time for the country.

Last week, a general assembly of the ruling Palang Pracharat Party was triggered by the mass resignation of 18 members of the executive.

This is predicted to pave the way for the election of Deputy Prime Minister Prawit Wongsuwan as leader of the party. 

This, in turn, is expected to lead to a cabinet reshuffle as those behind the new leader have been aiming for more rotation of cabinet seats among the top echelons of the political bloc.

Economic team may be politically targeted

It is also feared that the economic leadership of Deputy Prime Minister Somkid Jatusripitak, who has been at the helm of Thailand’s economic team since 2015 and who previously served under Prime Minister Thaksin Shinawatra, a decade previously, including as Minister of Finance, may be in question as this heave progresses.

This has led to speculation on the future of key economic officials including the Minister of Finance and current party leader. Minster Uttama Savanayana is expected to be jettisoned at least from his current roles.

The Bank of Thailand governor is also due to retire shortly, in a separate development, after declined to go forward for a second term.

Speculation rife on who will be the next Minister of Finance if Deputy PM Prawit Wongsuwan assumes leadership of the ruling party

Over the weekend, there was intense speculation that a former governor of the Bank of Thailand, Prasarn Trairatvorakul, may be handpicked by Deputy Prime Minister Prawit for the role of Finance Minister if he assumes the leadership of the party.

This followed weeks of speculation that it would be the current minister’s deputy, Santi Promphat.

Senior minister warns party could split apart

Others are speculating that a new face and a new mode of thinking is required to oversee the Finance Ministry as the Thai economy faces perhaps one of its greatest challenges. 

This has prompted the current Justice Minister, Somsak Thepsuthin, who was one of those who resigned this week as part of the heave and is one of three members of the influential Sam Mitr (Three friends) group of the party to warn that continued infighting could lead to it breaking apart altogether.

Opinion polls show support for the coalition government plummeted by nearly 50% in recent days

The public already has its concerns. 

A Super Poll opinion survey, conducted in recent times, as the government pushed through its ฿1.9 trillion financial support package through parliament, showed support for the coalition government at over 39%. 

In the latest poll conducted from June 1st to 5th on a large sample of 1,871 adults throughout Thailand, support for the current ministry had nearly halved to 20.4%.

Further reading:

Election of Prawit as Palang Pracharat leader will see more grassroots politics in government

Economic hole caused by virus pandemic yawns as Bank of Thailand flags large current account loss

Emergency decree extended by Thai government but politics behind the scenes abuzz with PPP party heave

92% of suicides due to the virus are among the self-employed according to expert research group in academia

Government moves to clarify that it is not seeking cash from the kingdom’s richest business leaders in overture

Pheu Thai MP calls on Prime Minister to resign as index shows a collapse in business confidence to a 9 year low

Polls show the public becoming more polarised as Deputy PM assures public there is nothing to worry about

Fake news centre ready as rights activists push for the toning down of the Computer Crime Act

Thammanat claims the media attacks on him are a plot to overthrow the Thai government by a network

New Thai cabinet finalised as government set for July launch, PM to retain old hands at the helm

Baht again being targeted by big money piling even more misery on an already crippled Thai economy

Industry boss urges Thailand to join alternative Pacific trade pact and plan for a long recovery from virus debacle

Prayut to meet the people as former minister lashes out at the current government’s ‘multi crisis’ economy

Thai workers left facing mass unemployment as Chiang Mai hotel staff protest ฿10m wage arrears

Risk must be taken to open up Thailand and its tourism industry without delay says richest man

Richest man in Thailand calls for less time spent at school and a Thai education revolution for a new era

PM calls in business tycoons to help the country crawl back to economic normality after virus catastrophe

Government begins looking at borrowing options to fund huge ฿1.9 trillion economy rescue package

Thailand and US aim for a new more ‘proactive’ trading relationship as ambassador meets Prayuth

Challenge of defeating both a health and economic emergency a big ask for Thailand’s government in crisis mode

Thailand faces a third shock after the virus if high debt and the informal economy are not prioritised

No limit on borrowing as Somkid plots the biggest stimulus package yet to address the virus crisis