The Finance Ministry has cut its economic forecast for 2021 to 2.8% from the 4.5% expected in October, factoring in the resurgence of Covid-19 and fresh government stimulus measures.
Thursday’s downgrade follows similar recent warnings that Thailand faces downside risks.
Earlier this month, the central bank signalled its own 3.2% GDP growth forecast for the year may need to be reduced. The International Monetary Fund also recently lowered its 2021 GDP estimate for Thailand to 2.7% from 4% previously.
"The impact of a new wave of outbreak is hurting the economy this year and contributes to the 2021 GDP downward revision," said Kulaya Tantitemit, acting head of the Fiscal Policy Office, adding that the main reason for the cut is a reduction in expected tourist arrivals.
The government has announced a series of measures this month, including 210 billion baht in cash handouts, to help counter the impacts of a spike in new cases since mid-December that has driven the country’s total to more than 16,000.
The government so far has refrained from imposing the type of broad lockdowns that were used during the initial outbreak last year. Instead, it has placed restrictions on business and travel depending on the severity of the outbreak in each region, and plans to relax curbs starting next month as local infections have eased in some regions.
The ministry also revised up its 2020 GDP estimate Thursday, now saying the economy probably shrank 6.5% last year compared to the 7.7% contraction it previously forecast.
The 2020 estimate was changed because of better-than-expected performance in the third quarter and the impact of fiscal stimulus measures, Ms Kulaya said.
The government’s cash-handout program is expected to boost this year’s GDP by about 0.5-0.6 percentage point, while a programme that subsidises retail purchases can add around 0.12 percentage point, Ms Kulaya said.
Exports are expected to grow 6.2% this year, up from 6% previously expected.
Tourist arrivals, which already plunged from 39.9 million in 2019 to 6.7 million in 2020, are expected to fall further to 5 million this year, bringing in an estimated 260 billion baht in revenue.
Government spending is expected to rise to 4.24 trillion baht, up 9.6% from last year.