Thailand is facing a mounting bill for its draconian policy of sealing off the kingdom from foreign tourism and normal passenger flights. A Krung Thai Bank report this week warns that it might take Thailand at least 4 years to recover while its daily losses and impact on GDP may even rise in the first quarter of next year without dramatic action due to last year’s historical base. The economic impact of this situation has already become structural.
Krung Thai Bank, through its economic analysis unit, is warning that Thailand could be on the verge of a structural economic change due to the loss of its vast foreign tourism industry, formerly one of the most significant in the world, which it predicts may not return to anything like normality until 2025 as the economic impact of Covid 19 virus measures appear to be more severe than anticipated.
As the Thai government ponders on whether it will take a chance and reopen the kingdom to even a limited and controlled form of foreign tourism, the economic analysis arm of Krung Thai Bank has revealed that the kingdom is losing over ฿ 8 billion a day on lost tourism revenue alone since early April.
This is due to the unprecedented block placed by Thai authorities on incoming passenger flights from foreign countries since the beginning of April this year which although amended for pre-approved repatriation of Thais and foreigners, has still meant that the foreign tourism industry has been halted.
Scale of the economic damage is growing and the impact is more severe than previously thought
The scale of the economic damage to Thailand’s economy is still yet to be quantified but increasingly, respected economic forecasters and reports are pointing to it as being more severe than expected.
Not only have tourism-dependent hotels been reduced to double-digit occupancy with rising losses but many business concerns among the spectrum of smaller, ancillary commercial ventures such as restaurants, bars and entertainment venues particularly in tourist hotspots have simply closed down.
Competitors moving in with lost revenue in trillions of baht even if ministers do something
The kingdom will soon begin to lose out to other destinations which are grasping new ways of preventing the spread of the virus such as flight testing.
A survey published over the weekend suggested that 57% of global tourism will have been wiped out by the pandemic by the end of 2020. In Thailand, even with a limited reopening, this figure will be nearer to 80% while without it, it could well be as high as 83%.
The international report highlighted Bangkok as the destination which will see the sharpest drop in the world.
Krung Thai Compass, the state bank’s economic think tank has predicted that Thailand will lose ฿ 2.1 trillion in income before the end of the year in lost tourism revenue.
This is assuming the arrival of 6.8 million visitors with perhaps 100,000 arriving between now and the end of 2020 even if Thai ministers eventually go against the stiff opposition from within the Centre for Covid 19 Situation Administration and the medical establishment to allow controlled access by foreign tourists paying a premium price for a commercial state quarantine product.
Money has been lost to the commercial sector and the grassroots of Thailand’s once resilient economy
The trillions of baht in income has been lost to Thailand’s commercial sector which consists of established tourist firms such as hotels but also millions of once self-employed Thais who serviced the now-defunct industry.
Thailand’s tourist industry economy was estimated to account, in real terms, for 20% of its GDP due to the combined and varied nature of foreign tourism economic activity which directly and indirectly reached into the pockets of Thailand’s economic grassroots. Now it is simply gone.
This grassroots sector, for so long, was the key to Thailand’s resilience as an economy but this pandemic emergency is unprecedented. It has effectively cut the country off in the same way as a major war.
Situation is becoming unpredictable and less within the government’s ability to control
The events of 2020, it is feared, will have unpredictable consequences for the ‘real’ Thai economy which we are already beginning to see.
The Krung Thai Bank report also raises strong concerns about the return of foreign tourists to Thailand in 2021.
Tourism Authority of Thailand Governor Yuthasak Supasorn, at the weekend, suggested that he is expecting 20 million foreign tourist visitors in 2021 or approximately 50% of the 2019 figure.
However, he prefaced this by stating it depended on a widespread vaccine.
This also assumes a level of pent up demand that may have applied if relief had come earlier but the extended delay is now resulting in permanent change both internally and externally.
Shutdown is inflicting permanent and structural change in the market both inside and outside
We are now beginning to see large swathes of the tourism industry have financially extended themselves to the limit while, at the same time, smaller firms and operators have closed or are closing. The shutdown’s impact is becoming structural.
This means that Thailand may not have the same tourism industry for visitors to come back to in 2021 nor is it still likely they will come back in the same numbers. The reasons for this include competition from other tourist destinations which have already reopened and diminished economic circumstances across the world.
Mr Yuthasak expressed a view, in recent days, that 75% of Thailand’s visitors in 2021 will be from Asia but also this week, a Chinese diplomat in Bangkok, Yang Xin, deputy chief of mission at the Chinese Embassy, revealed that China was not ready to encourage its population to holiday abroad and that this may take some time.
Bank estimates the best-case scenario for Thailand is a loss of 61% of visitors from 2019 in 2021
Krung Thai Bank is therefore suggesting that the best-case scenario for Thailand in 2021 may be 15 million visitors or 39% of 2019 levels. It estimates that the number could be as low as 900,000 or 2.3% of 2019 figures.
This would mean that, on a best-case basis, the kingdom will suffer a further loss of ฿1.9 trillion in 2021 or at worst case, a massive loss of over ฿3 trillion or a continued loss of ฿8.3 billion a day into 2021.
What appears to have caught Thai planners off guard as well as economic analysts is that the domestic tourism market has also collapsed along with foreign tourism suggesting a link or combined dynamic between the two.
It could well be that foreign tourism is a catalyst that affects all parts of Thailand’s economy including, not surprisingly, inward financial investment and confidence in the economy.
2021’s GDP figures will be bloody if foreign tourism is not reopened in a fuller, real sense and quickly
Historical figures for January 2020 to April this year means that a failure to reopen Thailand to foreign tourism before the end of 2020 on a wider scale is likely to see sharper Thai GDP contraction in the first quarter of 2021, a period which is usually buoyant for the kingdom.
The bank is suggesting that Thailand may have to be prepared to wait for up to four years before tourism, as we knew it before, resumes in 2025.
Even then, there is no guarantee that Thailand can ever regain its unique tourism market due to the disruption and changing environments both within a country once known as the Land of Smiles and without.