The baht rallied by 1% on Tuesday along with the stock exchange after it became clear that the Thai government is intent on reopening the economy in September and welcoming back foreign tourists, with wider access, by mid-October as promised by Prime Minister Prayut Chan ocha on June 16th last in a live TV address.
The Thai government appears to be moving decisively this week towards a wider reopening of the kingdom in mid-October as one of the country’s leading public health officials explained a new, more pragmatic and economy friendly approach that will see the country living with the COVID-19 virus as the focus shifts to recovering the country’s battered economy. News of the new approach and a positive statement on the Thai economy from credit ratings firm, Moodys, saw the Thai baht gain over 1% against the dollar on Tuesday although in recent days, the Japanese financial giant Nomura predicted a continued weakening of the Thai currency to ฿34 against the dollar and an extension of this year’s projected current account deficit, which undermines the currency, into 2022.
With reports over the weekend and the latest figures published by the Centre for Covid-19 Situation Administration (CCSA), showing a decline in infection rates, the government is reportedly moving towards a new containment strategy against the virus which aims to see the kingdom’s economy brought back to life.
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Department of Disease Control Director-general, Dr Opas Karnkawinpong, on Monday, revealed a new programme ‘Smart Control and Living with Covid-19’ which will be considered by the CCSA this week.
Government on target to deliver the PM’s promise, made in June, to open up Thailand to foreign tourism
The top public health official referred to the statement given by Prime Minister Prayut Chan ocha, during a live TV broadcast to the nation in mid-June last, when he told the public that the kingdom would fully reopen to international foreign tourism from mid-October.
‘I am setting a goal for us to be able to declare Thailand fully open within 120 days from today, and for tourism centres that are ready to do so even faster,’ General Prayut said on Wednesday night, June 16th, just as the Delta variant took off, leading to a spike in infections which, it is understood, passed its peak sometime between August 13th and 16th last.
‘We cannot wait for a time when everyone is fully vaccinated with two shots, or for when the world is free of the virus, to reopen the country.’
New approach focuses on the most vulnerable and coincides with a change in Germany where hospitalisations and not infections will be monitored
On Monday, Dr Opas gave some outline indicators of the new approach that would be taken by public health officials who, it is understood, will focus their efforts on threats posed by the virus and infection patterns related to the most vulnerable including those who are elderly and with underlying diseases.
The new approach being promoted is similar to pronouncements coming from western governments this week.
The German government has just made it clear that the incidence of infection in any particular area will no longer be a key measurement in informing authorities whether to impose public health measures or restrictions.
This is due to the high rate of vaccination among the population already achieved in Germany.
‘We decided today that we no longer need comprehensive protective measures when the number of cases or incidence is 50 because a large proportion of the people are vaccinated,’ said outgoing Chancellor Angela Merkel.
Germany will instead monitor hospitalisation rates.
Large shipments of AstraZeneca and Pfizer vaccines are contracted and on the way by the end of the year
It is understood that Thailand is set to receive a large amount of COVID-19 vaccines between now and the end of the year which should help the country advance its vaccination programme on a surer footing.
Last Friday, the Minister of Public Health, Anutin Charnvirakul and Dr Opas were present when the ministry signed a contract with Pfizer Thailand’s Deborah Seifert to deliver 30 million doses of the firm’s mRNA vaccine by the end of the year while, in recent days, AstraZeneca Plc has confirmed that its initial commitment to deliver 61 million doses to Thailand by the end of 2021 will now be honoured.
This should leave the government well on target to meet its goal of 100 million vaccine doses delivered by the end of the year in conjunction with other vaccine products.
On Monday, at Government House, spokesman Anucha Burapachaisri confirmed the Prime Minister was to take a call from Pascal Claude Roland Soriot, the worldwide Chief Executive of AstraZeneca.
‘We will now have to learn to live with Covid-19,’ said the Department of Disease Control Director-general
‘We will now have to learn to live with Covid-19 with the knowledge that COVID-19 will be an endemic disease, not confined to any particular country,’ said Dr Opas on Monday as he outlined the new approach.
The new plan will involve continuous outreach programmes with response teams visiting the most vulnerable people and communities at risk.
It will continue to mean prioritising high-risk groups for vaccination.
Move to protect manufacturing plants with bubble and seal measures against clusters of infection
For instance, on Monday, the Department of Disease Control chief explained the government is enhancing its testing and treatment initiatives targeted at factories at the centre of the kingdom’s manufacturing belt.
An increase, this year, in Thailand’s exports is seen as critical to offset huge losses incurred through the closure of mass foreign tourism and the loss of consumption caused by lockdowns.
Dr Opas explained that factories that are found to be infected will be subjected to bubble and seal measures which will be deployed if 10% of the workforce is found to be infected.
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Infected workers will be removed to nearby field hospitals and treated for the disease.
Measures will be imposed for 28 days constraining the movement of workers from the site until another test, conducted after 28 days, gives the all-clear.
Plan urged by the Federation of Thai Industries
The goal of this program, developed in association with the Federation of Thai Industries, is to preserve the country’s economic output at this time and keep factories open for production.
Dr Opas gave some indication that September should see Thailand reopening as lockdown measures are due to expire by the 31st of August.
Government to reopen Thailand in September so that people can resume ‘their normal lives’ from that point
‘It is hoped that from September until the end of this year, and next year, we will allow activities to restart and people to resume their normal lives,’ he said on Monday. Based on the figures currently available, it has been agreed that the outbreak situation has reached its peak and will slow down.’
At the same time, despite the lower level of infection which on Monday saw 17,491 infections, the first time since July 30th that they were below twenty thousand, he urged caution saying it would take a few more days to confirm the trend.
The kingdom announced 17,165 cases on Tuesday.
‘However, the situation will be monitored for another three to four days to make sure the signs will be positive, though there are still some vulnerable areas that must be strictly controlled before the lockdown measures can be eased.’
Currently, only 8.2% of the population is fully vaccinated but this will change with larger deliveries
The note of caution was echoed by Dr Thira Woratanarat of the Faculty of Medicine at Chulalongkorn University.
He suggested the figures being released may not reflect the full extent of the continuing virus wave and referred to problems with self-test kits.
Thailand currently has only 8.2% of the population fully vaccinated with 25.8 million doses administered.
However, the government seems to be looking ahead to a critical level of vaccination being achieved over the coming two months over the period running into the reopening of key tourist hotspots such as Pattaya, Chiang Mai and Hua Hin in addition to the areas already receiving visitors from the Phuket Sandbox programme.
Phuket Sandbox has seen over twenty-three thousand foreign tourists arriving and they are now moving to other parts of Thailand under relaxed rules
The latest figures for the Phuket pilot programme show over 23,000 foreign tourists have arrived primarily from the United States, United Kingdom, Israel, France and Germany.
Over four thousand of these visitors have now exited the controlled Sandbox in Phuket and moved on to other areas in the country according to recent figures just released
This trend is expected to gain momentum after the terms of the Sandbox were recently adjusted to allow such migration after 7 days on the holiday island instead of 14 originally, which has already come into effect.
Officials feel the Phuket gamble has paid off
The Prime Minister and key public health officials are satisfied that the gamble taken by approving the initiative last June is now paying off particularly as the scheme ran into a challenge with an outbreak of COVID-19 on the island which has been controlled.
Phuket and Ko Samui pilot tourism reopenings feel the strain as infection numbers rise on holiday islands
Dr Opas noted this on Monday.
He said he hoped that where the virus can be controlled, economic activities can again be ramped up successfully.
Moodys stable outlook note comes after warnings last week that the economy was hurtling towards disaster
The clear signal of a return to prioritising economic initiatives is coming just in time for an economy that many feared, even as late as last week, was hurtling towards disaster.
The government received a filip on Tuesday when credit agency Moodys retained Thailand’s Baa1 rating and gave it a stable outlook.
It cited the kingdom’s prudent control of public debt in its favour while warning of the dangers of political instability and a slow recovery from the COVID-19 crisis because of the country’s dependence on foreign tourism and other chronic problems.
The ratings agency’s assessment was highlighted by Patricia Mongkolvanich, the Director of the Public Debt Management Office.
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It came after Bank of Thailand Governor Sethaput Suthiwartnarueput, last week, urged the government to borrow a further ฿1 trillion quickly to help support the economy, a move which was questioned by Minister of Finance Arkhom Termpittayapaisith on Friday who suggested that the latest loan tranche of ฿500 billion, approved by parliament in June, may be enough.
What cannot be disputed is that the kingdom is heading towards its first current account deficit since 2013 which is expected to come in a 2% of GDP at $10.3 billion or ฿342 billion.
This is the current projection from the country’s top economic analysis agency, the National Economic and Social Development Council (NESDC).
Government projected to run a 10.1% budget deficit
It comes as the government, which is approaching its year-end on September 30th 2021, appears to be heading for a 10.1% of GDP budget deficit following a lower deficit last year of 6.4%.
The kingdom, since April 2020, has lost an estimated ฿3.6 trillion or $109 billion in foreign tourism income.
Looming downside to the economy as a return to normal for foreign tourism will take some time
The economic damage inflicted by the pandemic and efforts to defeat the virus will not be repaired quickly with the kingdom facing a looming downside.
‘Thailand’s weak growth outlook, especially because of its reliance upon tourism, has soured sentiment toward the baht,’ said Dhiraj Nim of the Australia & New Zealand Banking Group Ltd this week when speaking with Bloomberg in New York. ‘It’s usual current account surplus has also turned into a deficit in recent months, eroding support for the currency.’
Baht rallied on Tuesday but is still down by over 10% in 2021 with Japanese firm Nomura predicting it to slide further into 2022 to ฿34 to the dollar
The baht has lost over 10.2% when measured against the last few hours of 2020 when the Thai currency dipped below ฿30 to the US dollar on the 31st December 2020.
On Tuesday, it rallied on the government’s new strategy ending the day at ฿32.9 driven up by the more positive outlook.
In fact, on Tuesday the baht gained 1.2% in 24 hours when news of the government’s determination to reopen the kingdom was factored in by the market coupled with the positive signal from Moodys.
The bad run for the baht, however, over the year so far, has been accompanied by $3.34 billion of investor funds being pulled out of Thai stocks over the same period.
Another year of economic contraction predicted by Standard Chartered Bank after last year’s steep drop
In recent days, Standard Chartered Bank has predicted that the Thai economy will see another contraction in 2021 following last year’s record 6.1% contraction and also a disappointing year in 2019.
In the meantime, Nomura Holdings, the leading Japanese financial holdings group, projected the kingdoms’ current account deficit to extend into 2022 and is expecting the Bank of Thailand to lower its interest rate in the short term.
Such a move, coming at the same time as the US Federal Reserve may be considering tapering off its supports to the US economy, could see the baht fall further with Nomura itself predicting a dollar to the baht exchange rate of ฿34 by the end of the year.
Weak recovery predicted even if Thailand reopens
It predicts a weak recovery for Thailand’s critical foreign tourism sector even if the government moves to reopen all tourist hotspots by mid-October and in time for the high season which runs from November to March.
This was confirmed in a note penned by Nomura economists Charnon Boonnuch and Euben Paracuelles this week.
However, in Bangkok, Kobsidthi Silpachai of Kasikorn Bank has urged more caution from the Bank of Thailand.
‘The BOT might be forgetting its mandate of managed float,’ he said. ‘Excessive moves in the currency is counterproductive economically as businesses cannot plan and price their products and services properly.’