Key indicator for Thailand’s economic prospects in 2021 will be the percentage of the public that has been vaccinated against Covid-19 as a third wave threatens in an economy that continues to decelerate but which has been buoyed by hopes that a vaccine programme can return the kingdom to normal by the end of 2021 with a reopening to foreign tourists as airline flight activity linked with the country is set to rise by 7% in April.

Amid a threatened third wave of the Covid-19 virus, the government’s economic planners are in a battle with the disease and time with victory depending solely on achieving herd immunity through a vaccine drive which up to last weekend, had only seen 0.35% of the population receive a first dose. It comes as the Bank of Thailand is suggesting that the Thai economy lost ground by another 1% in the period from January to the end of March 2021 despite an uplift in domestic confidence and a plunging Thai baht which should help boost exports.

Senior Director at the Bank of Thailand Economic Policy Unit, Chayawadee Chai-Anant, has suggested that the outcome of the first quarter will be another contraction of the Thai economy from January to March 2021. It comes amid growing signs of optimism in the domestic economy but also, now, a renewed threat of a third wave of infection with a vaccine rollout that is still waiting to take off and on which all hinges for the economy by the end of this year.

The Civil Aviation Authority of Thailand is calling on the government to provide vaccines to up to 20,000 key personnel in the industry as it revealed on Tuesday that airline flight activity for April, including domestic and international routes, is set to rise by 7%.

It comes as Thai authorities battle to push forward with an economic plan for 2021 which hinges on achieving growth in the order of 4% which will be dependent on the kingdom’s vaccination campaign and cooperative efforts with other countries worldwide battling to bring the Covid-19 virus under control.

Finance Ministry still targeting 4% growth but with only 0.35% of the public inoculated as of yet

Thailand is still targeting a 4% growth rate in 2021 according to Finance Minister Arkhom Termpittayapaisith with a recovery in 2022 and increased growth rates in 2023 and 2024.

This comes amid efforts to vaccinate the Thai population which have, up to the weekend, seen only 240,000 people receiving their first doses and over 42,000 being fully inoculated. 

That’s only 0.35% of the population who have, as yet, received a jab

Phuket is the subject of a more intensive vaccination drive as it still targets access for vaccinated tourists

In the meantime, a more intensive vaccination process is underway in Phuket which hopes to achieve herd immunity in order to reopen to vaccinated tourists by the 1st July with tentative plans to see the whole of Thailand reopen its doors to vaccinated travellers by October 1st.

Reopening of Phuket still not officially approved (Click here)

Currently, the Bank of Thailand is estimating that the country will see 3 million foreign tourists this year while the Finance Ministry is targeting 5 million including up to two million visitors to Phuket if the current planned reopening to vaccinated foreign tourists without quarantine goes ahead in July.

Bangkok may become a red zone for the virus

This comes as areas of Bangkok are about to be relabeled as red zones for the virus with infected pubs being closed in key districts of the city while others face limited opening hours as a new wave of the virus appears to be emerging.

Experts in government circles say there are ominous signs of a possible third outbreak centred on Thailand’s capital.

This means the outlook for the kingdom’s economy remains even more uncertain.

Domestic economy has been recovering and driving a plunging baht, down 4.7% since January this year

A Monetary Policy Committee of the Bank of Thailand, last week, indicated that there were strong indicators of a recovery in the domestic economy with signs of underlying inflation rallying and strong surges in imports for both January and February this year.

This has seen the Thai baht weaken against the US dollar by nearly 4.7% since January and is now valued at ฿31.38

Thai exports rose in February but the economy is still down quarter on quarter compared to 2020

In February, Thai exports continued to expand at a rate of 7% although senior economists at the Bank of Thailand believe that the overall economy, quarter on quarter compared to 2020, will show a slight contraction.

‘So, we think it should be negative both year-on-year and Q-on-Q,’ said Chayawadee Chai-Anant of the Bank of Thailand last week. Ms Chayawadee is a senior director at the Economic Policy Unit.

It came as the bank’s experts shared the latest economic data with the media.

Economy expected to contract by up to 1% in the first quarter of 2021 with higher current account deficits

The economy has also been set back in the opening quarter of 2021, significantly, by a near-complete absence of foreign tourists, with visitor numbers off by 99.75%.

The overall effect of this will be that the Thai economy is expected to contract by up to another 1% since the end of 2020 bringing the overall contraction from 2019 to 7%.

The kingdom had a current account deficit of $0.7 billion in January and a bigger deficit of $1.07 billion in February which explains the diving baht.

Economists saw surging imports and a buoyancy in confidence in February as a positive indicator of a reviving domestic economy springing to life

Despite this, economists have been encouraged by the pick up in domestic activity which has seen imports surge by as much as 23.9% in February compared to the same period last year and an upswing, across the board, in key economic indices suggesting a pick up in manufacturing activity and confidence.

Growth was seen at an advanced pace in the output of electronic products as well as in the food industry and the automotive sector.

Imports related to boosted capital expenditure was also a very healthy and encouraging sign for the government. It indicates that Thai business concerns are investing for the future and planning for improved productivity.

Hopes and confidence have risen on the back of a national vaccination plan and government supports

This can be attributed to hopes that the pandemic emergency can be brought to an end in Thailand by the end of the year as the vaccination process is rolled out.

The government is targeting a figure of 60 million doses or over 50% of the adult population being vaccinated this year.

The success or failure of the government on this metric will probably determine the country’s economic performance as the Covid-19 virus has been the dominating factor now since this time last year and will continue to be in 2021.

Rising public expenditure in the first quarter

The underlying improvement in the domestic economy seen in the first quarter, therefore, was due to government support and stimulus with an improved export performance. 

Public expenditure was boosted from last year according to the central bank although this was off a low base due to a budget disbursement legal issue in 2020.

This, combined with a more optimistic outlook, saw an improvement in domestic consumption.

The optimistic outlook may also have been accelerated by gains in farmer’s incomes and prices for produce combined with government efforts to protect the public from the second wave of the virus which brought the headline inflation rate lower, in fact, down 0.08% in March from February but the underlying core inflation rate was up by 0.09% which is a positive signal for economic planners.

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Further reading:

Reopening of Phuket still not officially approved although it is the ideal test for a broader move

Minister urged not to be afraid to borrow in 2021 as fears grow for a quick foreign tourism revival

Economy to rebound as the year progresses driven by exports and a return of mass foreign tourism

Door closing on quick foreign tourism return as economic recovery is delayed to the end of 2022

Phuket’s plan to self vaccinate on hold as Interior Ministry orders private sector out of vaccine deals

Refloat of foreign tourism in the 2nd half of 2021 with vaccines pushed by minister and industry for the sector

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