The Finance Ministry is insisting the economic growth for 2021 will be in excess of 1% driven by renewed domestic spending, exports and now a strong foreign tourism drive in the last two months. Currently, the Bank of Thailand is projecting 0.6% although there are growing grounds for optimism with projections that the baht will strengthen and could even reach ฿31 against the US dollar over the next three months.
Confidence in the Thai economy has risen sharply among foreign business owners and operators in the kingdom according to a survey welcomed by the Prime Minister’s Office this week. Senior Bank of Thailand director and economist Chayawadee Chai-Anant has also warned that Thailand’s recovery may take time but acknowledged that the economy has now begun climbing towards the ‘mouth of a hole’ in October due to a range of initiatives by the government.
Confidence is rebounding in the economy since September driven by the actions taken by the government which include more emphasis on injecting fiscal stimulus to spur growth and the moves by the Prime Minister to speed up the reopening of the country from November 1st to 63 countries with no quarantine required for vaccinated tourists.
On Friday, Prime Minister Prayut Chan ocha welcomed the results of a University of the Thai Chamber of Commerce (UTCC) survey which showed a range of indices which capture the more optimistic sentiment among business leaders.
In particular, the survey revealed that confidence among foreign business operators in Thailand has risen sharply.
Survey covering 7,810 foreign business executives from 41 countries showed a marked rise in business sentiment and confidence in the Thai economy
The survey measured the sentiment of executives of 7,810 foreign operated business concerns with owners from 41 countries.
It saw a sharp rise in both overall confidence in the Thai economy and business prospects rising from lows of 29.8 and 26.8 respectively measured at the end of the second quarter of this year or the end of June to 44.9 and 33.4 measured at the end of September.
The same survey showed a sharp rise in confidence among foreign investors which rose from 27.7 at the end of last year to 41.7 at the beginning of October.
Linked with October 11th reopening TV address
The news has been welcomed by the Prime Minister’s Office where spokesman Thanakorn Wangboonkongchana linked the buoyancy to the October 11th live TV announcement by Prime Minister Prayut Chan ocha and a determination by the government’s economic team to rescue the economy in 2021.
Currently, the Bank of Thailand’s Business Intelligence Unit is being more cautious and forecasting marginal growth, year on year, of only 0.6% which has been reduced from a previous assessment of 1.3%.
However, the Finance Ministry and Minister of Finance Arkhom Termpittayapaisith are confidently predicting a growth rate in excess of 1% given increased government stimulus, a pickup in domestic spending and confidence with the easing of restrictions and what is shaping up to be a stronger than expected foreign tourism outlook following this week’s reopening.
Bank of Thailand emphasises the need for further fiscal stimulus, warns of a slow recovery into 2022
The Bank of Thailand has already accepted a recovery in domestic expenditure but is closely monitoring issues such as the residual threat from the virus, rising inflation driven by higher energy prices and the country’s chronic problem of household debt.
A senior director also this week made it clear that this is only the beginning of a journey out of an economic catastrophe that stuck the kingdom last year and would take time for things to fully recover.
It has also underlined the need for continued government stimulus and fiscal support and pointed towards possible upward pressure on interest rates in 2022 as the United States is poised to enter into what most analysts believe will be the start of a cycle of rising rates.
The bank warned that recovery will be slower than expected although it acknowledged an improvement across key sectors of the economy from exports, to domestic consumption and the prospect of increased foreign tourism earnings.
Significantly, it noted that September had seen a drop in foreign tourism income which may have prompted the decisive reopening initiative by the prime minister in early October.
Majority feel Thailand is over the worst
The University of the Thai Chamber of Commerce (UTCC) survey showed that 50% of business respondents believed that Thailand has passed its lowest point in the COVID-19 crisis and will now enter into recovery mode.
Mr Thanakorn, on Friday, emphasised the upward trend since September and the fact that it was the seventh month in a row of increased exports driven by strong demand for farming and agricultural produce.
The optimism of the Prime Minister’s Office and the Finance Ministry has been repeated by some financial analysts who suggest that there is a strengthening of economic conditions and already some are predicting a 3.5% growth rate for 2022.
Thai baht is expected to gain and reach ฿31 to the US dollar in the next 3 months if tourism booms
The Thai baht is expected to gain ground from now to the end of the year and projected to trade at ฿32.5o to the US dollars with some analysts saying it could even go as high as ฿31 to the US dollar if the incoming wave of foreign tourists is both strong and sustained.
The last quarter saw a current account deficit of $1.3 billion but turning this around is expected to boost the baht.
The government spokesman, Mr Thanakorn, this week emphasised the importance of working with foreigners including welcoming tourists to help push the country’s economic recovery from this point.
‘Thailand’s opening-up on November 1st will also help boost the economy in the last quarter of this year and keep it moving forward. Both consumption, production and domestic travel of Thai people have also increased. This is in line with the guidelines that the government has laid out. It is important that everyone works together to build confidence for foreigners to travel and do business in Thailand with strict measures to prevent and control the spread of COVID-19.’
PM urges vigilance against the virus threat
On Friday, as he finished chairing a meeting of the Centre for Covid-19 Situation Administration (CCSA) and before embarking on a trip to the climate change summit in Scotland, the Prime Minister, Prayut Chan ocha highlighted the importance of vigilance and a defensive stance against the reemergence of COVID-19 as a threat to the economy.
He said that a stock of the new antivirus treatment from US firm Merck, Molnupiravir, had been ordered but appeared concerned about the country‘s border control efforts.
While confirming that cross border trade would be allowed to restart with limited contact with Thailand’s neighbouring countries, he emphasised that the new relaxed entry requirements for visitors do not apply to arrivals in the kingdom by land and by sea.
‘Officials must be serious about regulating arrivals through other means and keeping out illegal migrants. Neighbouring countries will be requested to cooperate,’ he said. ‘The government has prepared many appropriate measures. Everyone must follow them to the fullest extent and avoid the risk of transmission of Covid-19.’
Top Bank of Thailand director says the economy has begun climbing towards the ‘mouth of a hole’ from September in a detailed assessment this week
A detailed review of the economy was given this week by senior director of the Bank of Thailand, Chayawadee Chai-Anant.
She highlighted a significant improvement in prospects from September after the economy was hit badly by several factors in the third quarter of this year.
She pointed to the government’s easing of restrictions in September, fresh fiscal stimulus funding and confidence following the reopening of the country announced in early October for what looks like the opening of an economic recovery period.
However, she warned that this will take time because of the extent of economic damage inflicted on the economy even in 2o21.
She described Thailand’s economy as only now beginning its climb towards the ‘mouth of a hole’ or a slow recovery with encouraging signs even in September from the service sector.
Labour market is still ‘fragile’
A key concern going forward is the labour market which she described as ‘fragile’.
‘Given the huge revenue pitfalls that have been lost during the two years of COVID-19, the Thai economy will need some time to recover. But at least we are out of the bottom in the last 3rd quarter, now and next year will be a period of recovery to climb to the mouth of a hole. The Bank of Thailand has prepared loan rehabilitation and debt restructuring initiatives to support the business sector. The good thing is economic activity is now improving in all sectors. This includes the service sector, both in September and October. We began to see a slowdown in the return of migrants returning to the industrial sector. However, the overall labour market is still fragile. Because most of the unemployed workers in the previous period are unable to return to work.’
Decisive reopening of Thailand from November 1st is welcomed even if it means so a resurgence of the virus, ongoing vaccination campaign needed
She welcomed the decisive reopening of the country from November even if it brings with it the increased risk of a virus surge which must be met with continued vaccination efforts across the country.
She highlighted the fact that Thailand, while facing heightened inflation and rising oil prices, is not in the same position as other world economies because of the severe impact the virus has had economically across the population.
This was one of the reasons why the bank would strive to maintain low-interest rates. She did not think inflation was a serious threat, at this point, in Thailand’s case.
‘For opening the country, the Bank of Thailand sees it as a positive effect on the economic recovery. Even if the infection has increased from the present. But vaccinating and distributing the vaccine, if the goal is achieved, will ensure fewer people become seriously ill. As a result, the opening of the country can continue. At the same time, the Bank of Thailand will continue to implement an accommodative monetary policy to support economic recovery. In view of the fact that Thailand’s inflation rate is even higher because of the price of oil. But it is still at a low level even with the baht depreciating. There is no need to reduce the momentum on the monetary policy side. Thailand’s situation may be different from countries with recovering economies that are beginning to worry about high inflation.’