Fitch sees 'very dim' path for GDP growth
Despite several fundamental buffers to cushion against the crisis, Thailand's near-term growth prospects are "very dimmed" due to substantial losses stemming from the absence of foreign tourist arrivals, said Fitch Ratings.
"It is one of the economies that is most reliant on tourism flows. [Thailand] has been a bit of a poster child for the middle-income trap [countries]. But the stable outlook reflects the rating pressure is not [skewed toward] the down side," said Stephen Schwartz, head of sovereign rating for Asia Pacific at Fitch Ratings.
Foreign tourist arrivals entering Thailand totalled 6.7 million during the first 11 months of 2020, down 81.2% from 36 million registered in the corresponding period of 2019, according to the Tourism and Sports Ministry.
Tourist receipts generated from both foreign and local tourists totalled 760 million baht between January and November 2020, a drastic decline from around 3 trillion baht registered in full-year 2019.
Tourist receipts account for about 12% of Southeast Asia's second-largest economy.
Thailand had zero foreign tourist arrivals from April to September 2020 due to stringent travel restrictions put in place to safeguard against the pandemic.
As Thailand's tourism industry has faced difficulties from a lack of international tourists for nearly a year, deregistration in the fourth quarter last year saw a record high with 765 companies in total. In December alone 293 tour companies gave up their licences, according to the Thai Travel Agents Association.
The tourism sector may have to wait until 2022 to see "normal" revenue, described as 80% of the pre-pandemic level, as major markets are reluctant to ease travel measures unless a successful vaccine is distributed, said the Tourism Authority of Thailand.
Thailand's economic recovery will likely not be "V-shaped" as the services sector, including tourism, will be slow to gain traction amid prolonged restrictions on movement and new social distancing norms, according to Fitch.
The firm predicts Thailand's GDP will contract by 6.3% in 2020 followed by an expansion of 3.9% in 2021.
Thailand's (BBB+/Stable) sovereign rating is still supported by comparatively robust public and external finances, said Fitch.
Thailand's economic growth outlook is challenging this year because the growth trajectory relies on international travel and the services sector, while the government's fiscal and monetary stimulus have been fairly conservative in terms of size, said Johanna Chua, chief Asia economist at Citigroup.
Approved in April, the 1-trillion-baht loan decree was aimed at shoring up the economy during the coronavirus crisis.
Of the amount, 600 billion baht is for implementing health-related plans and giving financial aid to affected individuals. The other 400 billion is for economic and social rehabilitation via projects aimed at creating jobs, strengthening communities and building community infrastructure. Public debt would rise to 57% of GDP upon borrowing the full amount under the loan decree.