NESDC focuses on worrying trio of concerns

NESDC focuses on worrying trio of concerns

Higher unemployment, a lack of funding for SMEs and rising household debt are priorities

Mr Danucha says unemployment, especially in the tourism sector, is the biggest concern in Thailand following a new outbreak.
Mr Danucha says unemployment, especially in the tourism sector, is the biggest concern in Thailand following a new outbreak.

The National Economic and Social Development Council (NESDC), a government think tank, sees three areas of key concern for 2021: rising unemployment; tight liquidity among small and medium-sized enterprises (SMEs); and higher household debt.

Danucha Pichayanan, secretary-general of the NESDC, said the agency is keeping a close watch on those three issues as they may affect the overall economy this year.

"The Thai economy still has high uncertainty, notably in the first half of 2021 because of the virus crisis," he said.

"Unemployment, especially in the tourism sector, is the most worrying area after Thailand saw a new surge of Covid-19 infections. The government needs to continue retaining employment in the tourism sector in 2021."

Tourism and Sports Minister Phiphat Ratchakitprakarn said recently there is little hope of attracting international arrivals during the first quarter of this year as the pandemic continues to spread in Thailand.

There is no need for the country to tighten travel restrictions on foreign passengers from the UK or other countries because there's no demand from tourists to visit Thailand at this time, he said.

Mr Phiphat said Thailand expects to face a long dry spell for international tourism.

Those who do travel here will be foreigners who have special purposes, and are not here for tourism.

He said tourism may restart after international flights return to normal, which could occur in April, driven by the Songkran festival.

If Thailand and China are ready to engage in more discussions on "travel bubbles" when the cool season ends, there's a higher possibility of attracting more travellers during the summer of 2021, said Mr Phiphat.

The Tourism Authority of Thailand projects the country is looking to welcome more than 10 million foreign arrivals next year, generating 500 billion baht.

Previously the NESDC estimated the employment rate was likely to improve in the fourth quarter of 2020 as well as this year.

The agency is scheduled to announce GDP and economic figures for the fourth quarter on Feb 15, 2021.

SME LIQUIDITY CRUNCH

Mr Danucha said the agency is also concerned about tight liquidity among SMEs affected by the pandemic.

He said the government may need to implement additional measures to support SMEs in carrying on their businesses.

SMEs are a fragile segment as firms have been ravaged by the coronavirus outbreak.

The rising credit risk of SMEs makes it more difficult for these businesses to obtain loans, said Mr Danucha.

In December, the cabinet approved fresh aid measures for SMEs through portfolio guarantee scheme (PGS) 9 and via the fourth phase of credit guarantees for micro-entrepreneurs worth a combined 175 billion baht, aiming to help enable SMEs more easily access funding and have sufficient liquidity to continue their operations.

He said the NESDC is also monitoring rising household debt because of the poor economy and the virus crisis.

According to the agency's latest report, household debt in the second quarter of 2020 stood at 13.6 trillion baht, expanding by 3.8 percentage points year-on-year. That amount accounts for 83.8% of GDP.

The main reason for the increase was the severe contraction of the economy and higher debt value.

The NESDC predicted the trend lines for household debt-to-GDP ratio and outstanding non-performing loans to increase due to the economic contraction and unclear signs of recovery.

The agency said Thais lack assurances and immunity in coping with the economic uncertainty caused by the pandemic.

Mr Danucha said the government still needs to assist households, particularly those who are considered good debtors or have the potential to repay debt.

NEXT YEAR'S FOCUS

He said the government needs to keep its focus on speeding up the fiscal 2021 annual budget disbursement rate to be at least 94.4% of the total budget, accelerate state enterprises' capital budget disbursement rate to be at least 70%, bump up the carry-over budget disbursement rate to be at least 85%, and ensure the 1-trillion-baht loan decree is at least 70% disbursed.

In the first half of 2021, according to Mr Danucha, Thailand's export and investment outlook will be decided by the Covid-19 situation.

If the spread is not drastic and many countries avoid complete national lockdowns, Thai exports and investments are likely to gradually recover, he said.

Given the strengthening baht, Mr Danucha advises the government to accelerate private investment this year and introduce more measures to convince factories to upgrade their technology, importing machinery to support production.

The Eastern Economic Corridor Office should also implement more measures to attract investors in targeted industries and create more joint ventures, while the Board of Investment should continue amending its privileges to lure foreign experts to work in Thailand, he said.

In addition, more assistance should be offered to community businesses in order to upgrade their products and help them sell more via online channels, said Mr Danucha.

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