Recovery momentum picks up in Q3
Thailand's economic recovery momentum gained traction thanks to quarter-on-quarter GDP growth in the third quarter, with exports and public investment expected as the main growth drivers for next year, says a research house.
GDP contraction has been upgraded to 6.4% from a 10.3% decline projected previously, attributed to an improved revision of all economic indicators, according to Krungsri Research, a research unit under Bank of Ayudhya.
The upward revision for this year's economic outlook reflects better than expected data in the third quarter, accelerated public spending and improved merchandise exports, said Somprawin Manprasert, chief economist and head of the research division of Krungsri Research.
The research house improved the contraction rate for private consumption from 4.2% to a 1.1% decline, while public consumption has also been revised from 2.3% growth to 3%.
Private investment is forecast to contract by 11%, up from a 14.7% plunge expected earlier. Public investment is projected to expand 12% from 2% projected previously.
For merchandise exports, Thai shipments are expected to shrink by 7.5%, up from a 12.5% contraction projected previously.
Thailand's GDP contracted by 6.4% year-on-year in the third quarter following a 1.8% decline and a 12.1% contraction in the first and second quarters, respectively.
After seasonal adjustment, the economy expanded by 6.5% quarter-on-quarter in the July-to-September period from the second quarter. In the first nine months, the economy contracted by 6.7%.
The improvement was attributed to the easing of lockdown measures and domestic travel restrictions, coupled with measures to rehabilitate the economy through fiscal stimulus, resulting in the recovery of economic activities and domestic consumption, said the National Economic and Social Development Council.
Given prospects of a global economic recovery, this should support the Thai economy recovering gradually, with exports anticipated as a key driver of GDP growth in 2021, said Mr Somprawin.
In 2021, Krungsri Research predicts Thailand's GDP growth rate will arrive at 3.3%. The forecast is based on growth of all economic indicators, led by a 10.5% expansion in public investment growth and a 4.5% gain in exports.
Private investment is forecast to expand by 3.2% next year, while government consumption and private consumption are projected to see growth rates of 3.8% and 2.5%, respectively.
Thailand's economic growth is expected to turn positive in the second quarter of 2021, supported by the low-base effect, government spending and a cyclical rebound of external demand, said Mr Somprawin.
Despite an improved outlook for exports, Thailand needs to beef up its competitiveness to prepare for a changing economic landscape in the post-pandemic period, he said.
"Amid improving external demand, Thai exporters need to develop products and look for new markets to increase sales," said Mr Somprawin.
"We are not very concerned about the stronger baht [against the US dollar] because currency appreciation is anticipated to occur worldwide as a result of the global economic recovery. Therefore [enhancing] competitiveness is the key."
With structural problems still prevailing, Thailand's economic growth will be pressured by domestic headwinds, especially a large excess in capacity in several service sectors, according to Krungsri Research.
Job losses will continue to weigh on household income and consumer spending, while a tourism recovery should lag other economic growth drivers, he said.
The research house estimates foreign tourist arrivals to decline to 4 million from 6.7 million this year, mainly because of the pandemic crisis.
Despite the latest progress on Covid-19 vaccine development, a surge in the number of foreign tourist arrivals is unlikely until the fourth quarter next year as the vaccine is expected to be distributed worldwide by then, said Mr Somprawin.
Domestic political unrest could undermine the country's economic growth and raises concerns over the continuity of economic policies, although the situation is expected to be under control, he said.
"With a gradual recovery of the Thai economy, government economic stimulus measures are still needed to shore up domestic consumption and tourism. These will continue to support the economic recovery momentum into next year," said Mr Somprawin.