Economy shrinks 6.4% y/y in Q3, less than expected

Economy shrinks 6.4% y/y in Q3, less than expected

People shop at a market in Bangkok's Yaowarat district as recovering domestic demand boosts the economy. (Photo by Apichart Jinakul)
People shop at a market in Bangkok's Yaowarat district as recovering domestic demand boosts the economy. (Photo by Apichart Jinakul)

Thailand’s economy improved in the third quarter after the government eased restrictions on movement and implemented a series of stimulus measures while getting the country’s Covid-19 outbreak largely under control.

Gross domestic product (GDP) shrank 6.4% from a year ago, the National Economic and Social Development Council said Monday, recovering from the prior quarter’s revised 12.1% contraction at the peak of the outbreak. The figure was better than the median estimate of 8.8% contraction in a Bloomberg survey of 19 economists. The council also raised its full-year forecast to a 6% contraction, from an earlier estimate of a 7.3% to 7.8% drop.

With tourism and trade hit hard by the outbreak, Prime Minister Prayut Chan-o-cha has spent hundreds of billions of baht in cash handouts and stimulus measures from a 1.9 trillion-baht economic package to support local demand. Meanwhile, a strengthening currency and political protests pose risks to the fragile recovery.

All the economic indicators, barring tourism, improved in the third quarter and government spending will remain the main growth driver for next year, Danucha Pichayanan, the council’s secretary general, told a news briefing. A strengthening baht and high level of unemployment remain risks for growth next year, he said.

The council’s full-year forecast of a 6% contraction compares with a 7.7% fall seen by the country’s finance ministry and the 7.8% decline the central bank expects. It also forecast a growth of 3.5% to 4.5% in 2021.

GDP rose a seasonally adjusted 6.5% in the third quarter compared with the previous three months, the council said Monday, better than the median estimate of a 3.9% gain in a Bloomberg survey of economists. The second-quarter GDP estimate was revised to -9.9% from 9.7% earlier.

The government wants the central bank to temper a rally in the nation’s currency, which is threatening its efforts to boost exports as an offset to the slump in tourism revenue. The baht has surged in the past month as foreign inflows resumed into Thai stocks and bonds.

Bank of Thailand Governor Sethaput Suthiwart-Narueput said last week that the country’s high foreign reserves and low foreign debt will help it weather the crisis, which will take time and targeted remedies to resolve. Around 3 million workers have been affected by the pandemic, with 700,000-800,000 people rendered jobless.

Challenges to economic recovery in 2021 include rising unemployment, as well as a drought, Covid-19 outbreak, global financial and economic situation, including US governance under the new president, Mr Danucha said.

Measures to accelerate economic rebound should focus on managing Covid-19 infection risks, helping the tourism sector, disbursing public spending, promoting private investment, preparing for a drought, and de-escalating the protest movement, he added. 

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