Q2 contraction poised to hit 13%

Thailand's second-quarter economic contraction could reach a record 13% year-on-year after business activity was halted by lockdown measures during the period, says the Bank of Thailand.

The anticipated decline would mark the lowest year-on-year growth figure since a 12.5% contraction in the second quarter of 1998 in the wake of the 1997 Asian financial crisis, said Don Nakornthab, senior director of the economic and policy department.

Overall economic activity shrank significantly in the second quarter as a result of coronavirus containment measures in Thailand and around the world.

External demand contracted sharply both in the tourism sector affected by international travel restriction measures and in merchandise exports hit by weakening demand among trading partners.

Mr Don said the central bank believes that the Thai economy bottomed out in the second quarter as earlier projected.

Major economies have recorded severe second-quarter economic contractions. The US economy shrank by a historic 32.9% on an annualised basis, while a 22% annualised decline was experienced by Japan's economy and Singapore entered a technical recession with a 12.6% year-on-year plunge.

Thailand's economy in the first quarter shrank for the first time since 2014, by 1.8% year-on-year and 2.2% quarter-to-quarter on a seasonally adjusted basis, as the pandemic cut off tourist arrivals and shuttered business activity.

Thailand completely lifted the lockdown on all businesses and activities on July 1 but extended the emergency decree for another month until Aug 31.

The central bank could revise higher its economic forecast for Thailand after economic conditions improved in June, Mr Don said.

Five economic indicators, including exports and imports excluding gold, domestic consumption, private investment and the manufacturing index showed improvement in June, he said.

"In the event of better economic data in the second quarter with a slower pace of contraction than the existing forecast, the central bank could revise up our 2020 GDP forecast to an [improved] contraction," Mr Don said.

Thailand's economy is predicted to shrink by 8.1% this year, mainly due to the coronavirus outbreak, according to the central bank.

The National Economic and Development Council will report Thailand's second-quarter and first-half economic data on Aug 17.