The economy got off to a grim start in the first month of the second quarter, with several key indicators the worst on record and state spending the only supporting factor, says a senior central bank official.
With an inbound travel ban in place to contain the coronavirus outbreak, no foreign tourists arrived in April, compared with 3.2 million in the same month last year, said Don Nakornthab, the senior director for economics and policy at the Bank of Thailand.
In the first four months of the year, there were 6.69 million international arrivals, a decrease of 52.2% from a year earlier. Most of those arrivals were in January and February.
With the inbound flight ban in effect until June 30, two more months of zero arrivals in May and June mean more pain for tourism-related businesses, especially hotels, restaurants and passenger transport.
Meanwhile, the value of merchandise exports in April contracted by 3.3% over the same period last year. Stripping out the historical value of shipped gold, export value was down 15.9% due to the sharp decline in demand worldwide.
Exports of automobiles and parts slid 49% in April to a record low.
“Thailand’s export contraction is expected to deepen over the next one or two months, crippled by tepid global demand because of the outbreak,” said Mr Don.
Given that import value slumped 17% year-on-year in April, the current account turned to a deficit of US$700,000. However, the country still recorded a current account surplus of $8.9 billion for the four months to April.
Private consumption dipped 15.1% year-on-year, marking a record low. The contraction is seen across spending categories resulting from rising unemployment, lower income and weak consumer confidence, coupled with the postponement of the Songkran festival and lockdown measures.
In April, the consumer confidence and business sentiment indices also recorded all-time lows.
With the government’s 5,000-baht monthly handout to those who lost jobs due to the pandemic, domestic consumption is expected to improve a bit in May, but will still be lower than in May 2019.
The labour market is particularly worrisome as the number of jobless and lay-off claims spiked for those under Section 33 of the Social Security Fund, Mr Don said.
The number of companies registering for temporary business suspension under Section 75 of the Labour Protection Act increased dramatically to 2,406 in April from 445 the previous month, while employees filing under the section surged to 465,218 from 96,264.
Under Section 75 of the Labour Protection Act, an employer is entitled to temporarily cease operations, during which time it must pay employees at least 75% of their regular working-day wages. The government’s easing of the lockdown should help improve the jobless rate going forward.
“Several key economic data contracted to record-low levels in April because of the pandemic. However, government spending was the only one factor supporting the economy,” said Mr Don.
The only thing keeping the economy afloat at the moment is state spending.
Public expenditure excluding transfers continued to expand 28.9% in April from the same period last year. Current expenditure expanded from purchases of goods and services.