MPC: Growth may fall below forecast
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MPC: Growth may fall below forecast

Diminished stimulus and vaccine doubts

Siam Square, usually packed with teenagers, is once again vacant during Thailand's latest outbreak. (Photo by Varuth Hirunyatheb)
Siam Square, usually packed with teenagers, is once again vacant during Thailand's latest outbreak. (Photo by Varuth Hirunyatheb)

Thailand's GDP growth this year could drop below the 3.2% baseline projection from plausible lower inbound arrivals amid uncertainties over vaccine efficacy and reduced fiscal stimulus, says the Monetary Policy Committee's (MPC) latest edited minutes.

The country has been grappling with higher infections since the start of 2021, with stringent restrictions imposed in five provinces to curb the contagion.

The MPC is a seven-member panel under the Bank of Thailand that sets the benchmark interest rate. The committee has been maintaining the 0.5% policy interest rate, a historic low, following three rate cuts undertaken early last year to lend support for feeble economic conditions.

Uncertainties surrounding the Covid-19 situation in the near term as well as uncertainties regarding vaccine efficacy and vaccination coverage in Thailand could affect the progress in the admission of foreign tourists and tourism recovery, according to the minutes.

The projected number of foreign tourist arrivals has been revised down following the new outbreak. The central bank forecasts inbound arrivals of foreign tourist arrivals in 2021 will tally at 5.5 million, a decline from an earlier projection of 9 million.

Thailand registered 6.7 million foreign tourist arrivals in the first 11 months of 2020, down 81.4% year-on-year.

The Tourism and Sports Ministry reported tourism receipts in the first nine months were valued at 655 billion baht, down 70.6% from the same period last year, or a decrease of 1.57 trillion baht.

Public expenditure, one of the main drivers sustaining Thailand's economy last year, is anticipated to be revised down, driven mainly by the lower-than-expected fiscal year 2021 annual budget and the carryover budget as well as a reduction and postponement of state-owned enterprise investment, according to the minutes.

"Fiscal stimulus could be lower than assumed in the baseline projection owing to a delay in disbursement under the post-pandemic economic recovery plan, the phase-out of government measures to stimulate private consumption in the first half of 2021 and the earmarking of funds available under the [1-trillion-baht] emergency [loan] decree, [which is] approaching the deadline in the second half of 2021."

Krisada Chinavicharana, the finance permanent secretary, said last month that the funds from the 1-trillion-baht emergency loan decree stood at 600 billion baht, while the combined investment budget of state-owned enterprises stands at 300 billion baht.

The remaining amount is sufficient to take care of the economy if the outbreak is under control, said Mr Krisada.

Small and medium-sized enterprises (SMEs) are at risk of continuing to endure the worst of the economic slowdown, according to the minutes.

"The fragile balance sheets of businesses, especially SMEs, could be at risk. If financial assistance fails to reach liquidity-constrained businesses sufficiently and in a timely manner, there could be adverse spillover effects on the labour market as well as the overall economy."

"The committee will monitor the adequacy of the government measures, fragility in the labour market, and various risks, including the new wave of domestic outbreaks, the progress of protocols for admitting foreign tourists and the financial positions of businesses and households, in deliberating monetary policy going forward."

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