The state planning unit, the National Economic and Social Development Council (NESDC), has cut its economic forecast to a contraction of 5-6% this year, down from the 1.5-2.5% growth projection made on Feb 17.
The agency cited a raft of negative factors, including the severe downturn of the global economy and merchandise trade, a sharp decline in the number and revenue from foreign tourists, the widespread drought, and relatively weak private investment and private consumption because of the Covid-19 outbreak.
The agency also lowered the country's export forecast to a contraction of up to 8% this year from 1.4% growth projected on Feb 17.
Thosaporn Sirisamphand, the NESDC secretary-general, said the new projections are based on a limited outbreak in the second quarter, the government's easing of lockdown measures in the second quarter, a full reopening of business in the third quarter and a tourism recovery in the fourth quarter.
"Nonetheless, this year's economy may see deeper contraction if there is a second wave of the coronavirus," he said.
The latest revision follows economic data released by NESDC on Monday that shows GDP in the first quarter of 2020 dropped by 1.8%, compared with a rise of 1.5% in the fourth quarter last year. It was the first contraction since early 2014.
The agency attributed the contraction in the first quarter to decreases in total exports of goods and services, private and public investment and government final consumption expenditure. However, private final consumption expenditure grew at a decelerated rate.
On the production side, NESDC reported the agricultural sector decreased by 5.7%, compared with a fall of 2.5% in the fourth quarter of 2019. This contraction was attributed to reduced yields of paddy, sugar cane, maize, cassava and oil palm because of drought, despite an increase in vegetables and rubber, together with livestock production including swine and chicken. Fishing and aquaculture rose by 0.8%
Non-agricultural production declined by 1.4%, in contrast to a rise of 2.0% in the fourth quarter of last year, mainly sourced from the industrial sector, with a fall of 1.9% because of a continual fall in manufacturing, whereas mining and quarrying; electricity, gas, steam, and air conditioning supply; water supply; and sewerage, waste management, and remediation activities represented an expansion.
Moreover, the services sector declined by 1.1%, in contrast to a rise of 4.1% in the fourth quarter of 2019. This stemmed from decreases in transport and storage; accommodation and food service activities; and construction.
On the expenditure side, private final consumption expenditure grew by 3.0%, compared with a 4.1% growth in the fourth quarter of 2019. However, the government's final consumption expenditure, gross fixed capital formation, exports and imports of goods and services contracted by 2.7%, 6.5%, 6.7% and 2.5%, respectively.
Seasonally adjusted GDP growth decreased by 2.2% compared with the previous three months.
Krungthai Compass Research Centre said Thailand's economy is entering recession conditions, citing the economic contraction in the first quarter as only the tip of the iceberg.
The research house forecast the economy will contract by as much as 8.8% mainly due to supply shock, weak domestic consumption, shrinking private investment and lower exports, with the highest contraction rate likely in the second quarter.
However, Tim Leelahaphan, an economist at Standard Chartered Bank (Thai), said tentative signs of a recovery are emerging and may be confirmed late in the third quarter.
The government started disbursing cash handouts in April, and businesses are gradually reopening. Private consumption may start to recover from June; it contracted in March for the first time since May 2015.
The tourism sector may start to pick up in the second half, initially on domestic travel. Early signs of an export recovery have also emerged, with a 1% gain year-on-year in the first quarter and electronics shipments returning to growth.