Thailand's economy will face a daunting recovery trajectory if tourism does not improve, as economic growth is tied directly and indirectly to foreign tourist arrivals, says Fitch Ratings.
"I think it is very hard to see Thailand mounting an aggressive recovery in [economic] growth in the absence of some kind of improvement in the tourism sector," said James McCormack, global head of sovereign and supranational ratings at Fitch.
Merchandise exports is an area where Thailand can compensate for the deflated tourism industry if the global economy recovers, as the country is open for trade, said Mr McCormack.
From January to July, foreign tourist numbers were 6.69 million, down 71% year-on-year, with spending dipping 70.4% from a year earlier to 332 billion baht.
Thailand, which had a record 39.8 million tourist arrivals last year, has recorded zero foreign visitors since April when a travel ban was imposed.
In an attempt to resuscitate the battered tourism industry, the Centre for Covid-19 Situation Administration in late September approved in principle the entry of foreign nationals, including business visitors and tourists, to help the country recover.
Requirements for entry include holders of specific visa types, a 14-day quarantine, having a Covid-19 test taken 72 hours before departure to Thailand, buying Covid-19 health insurance and a letter of consent signed to agree to comply with the government's Covid-19 measures.
Regarding prospects of higher public debt to GDP as a result of government stimulus measures to offset the Covid-19 impact, this trend has happened worldwide, with fiscal and public debt management as key for the medium-term outlook, said Mr McCormack.
"The real focus is what happens afterwards. The policy framework that Thailand has had for many years is a prudent approach for public finance, so we expect that to continue in the aftermath of the crisis and for any elevated level of government debt to be brought back down again," he said.
The ratio of public debt to GDP stands at 48%, worth 7.7 trillion baht, according to the Public Debt Management Office data.
Public debt will rise to 57% of GDP upon borrowing the full amount under the 1-trillion-baht loan decree.
The edited minutes of the Bank of Thailand's Monetary Policy Committee (MPC) said an economic recovery is still subject to various risks, including the global economic recovery being slower than expected, the deteriorating debt servicing capability of businesses and households, and the recovery of foreign tourist figures being more modest than previously assessed if the government protocols for admitting foreign tourists cannot be implemented.
The MPC discussed challenges for the economy in the period ahead, especially that a recovery would vary greatly among economic sectors, regions and firms in different segments.
Recommended measures include promotion of employment and labour skill development to accommodate those in sectors with a slow recovery outlook and considerable excess capacity; job creation in provincial areas to absorb returning workers; and supply-side policies, particularly economic restructuring, to support sectors with high recovery potential able to adjust their business models for the post-pandemic environment, said the edited minutes.