Early in May, Deputy Prime Minister Somkid Jatusripitak said that GDP number for Q1 “was not good” and that Q2’s number will be “much worse.”
The official announcement of Thailand’s Q1/Q2 GDP numbers was set for May 18, but was pushed back. The Finance Ministry cited the COVID-19 outbreak as the reason, perhaps fearing the country couldn’t handle too much bad news
But based on the numbers reported by the National Economic and Social Development Council (NESDC), the Thai GDP growth for the first quarter of 2020 was -1.8%, which is better than many have estimated.
But like Somkid said, it’s going to get much worse.
The Q1 GDP was better than expected, because expectation was a bit irrational. The ramifications of the virus outbreak didn’t actually hit until late in the quarter, as the lockdown and the emergency decree started in late March.
The negative growth was the result of reduced expenditure in the hospitality sector, which accounts for 14% of the Thai economy. The sector saw a 24.1% contraction.
There was some good news at the beginning of the year. In January, 3,810,155 tourists arrived in the country, an increase of 2.46% from the same month in 2019, according to the Tourism and Sports Ministry.
By February however, arrivals dropped almost by half compared to the same month last year.
Then the government gradually banned flights and travels.
And here we are, staring at Q2 like it’s a horror movie.
SCB’s Economic Intelligence Center (SCB EIC) said Q2 will be the worst quarter for Thailand this year.
Tourism has been almost at zero. Lockdown measures worldwide keep Thai exports in the warehouse. Lockdown measures within the country keep many businesses from operating and people from spending.
Expenditure on durable goods such as electronics, furniture and cars are delayed. Other sectors, particularly real estate and automobile, are also affected.
In terms of infection and death rates, Thailand might not suffer as much by COVD-19 when compared to many other countries.
On the other hand, for an export-led economy that also relies heavily on tourism, the Thai economy is being hit by the virus outbreak and lockdown measures like a Mike Tyson left hook and right cross.
Kasikorn Research Center estimated the Thai economy to shrink by 6%.
This is only if there isn’t a second wave of the outbreak and additional lockdown measures.
Historically, Thailand’s unemployment rate has been ridiculously low, thanks to the absorption of the workforce into the country’s vast informal economy. Last year, the unemployment rate, reported by the Bank of Thailand, was a mere 0.98%.
But for this year, the informal sector is a casualty of the pandemic. From street vendors to motorbike taxis, to the shops and markets, the freelancers and others, most have escaped the virus, none can escape the economic fallout.
On top of which, widespread droughts in the North and Northeast of Thailand made it very challenging for laid-off workers in major cities to fall back on farming.
The Chief of the NESDC, Tossaporn Sirisamphan, warned that the Covid-19 crisis may cause up to 8.4 million Thais to lose their jobs, while the drought could add another six million to the figure.
He expected the unemployment rate by year’s end to be at around 4%. The same number, or even higher than that of the 1997 Asian Financial Crisis (or the Tom Yum Kung crisis).
So the government wants us to take vacations.
With เราไม่ทิ้งกัน (No One Left Behind) cash handout program coming to an end, the Finance Ministry plans to ease access to credit lines for small-to-medium businesses.
SMEs are among the hardest hit by the pandemic and many operators have criticized previous efforts by the Bank of Thailand as being out of touch and out of reach. The credit lines may help many to recover, even though reportedly many SMEs will close up shops for good.
The Finance Ministry also wants to subsidize Thais to travel domestically. Two programs will be launched.
- กำลังใจ (Encouragement)
Health workers and the Village Health Volunteers (อสม) would get a three-day and two-night holiday-seminar trip within the country. These are the people who have been actively looking after villagers. They educate rural Thais about Covid-19 and ensure self-quarantine measures for those who return from other provinces.
As well, there are talks of increasing their pay from 2,500 to 4,000 baht a month.
- เที่ยวปันสุข (Vacation to spread happiness)
The program encourages all Thais aged above 18 to travel outside of our provinces. The government will reimburse expenditure on food and accommodation digitally. It is currently being discussed whether the reimbursed amount would be 2,000 or 3,000 baht per person.
The two programs are expected to be confirmed within the next few days.