MPC wary of tourist dearth
The lack of foreign tourist arrivals presents a major risk to Thailand's medium-term economic growth outlook, with a near-term recovery dependent on the resolution of the recent outbreak and fiscal support, says the Bank of Thailand.
The recovery of foreign tourist arrivals could be influenced by many factors, including a plan to reopen the country, the status of the outbreak and the effectiveness of the vaccines, according to the central bank's Monetary Policy Committee (MPC) in its edited minutes.
"External factors that could affect the pace of border reopening include travel restrictions from China and virus mutations that could reduce vaccine efficacy," said the minutes.
"Important domestic factors include the efficacy and distribution of vaccines, the willingness of the population to take the vaccine and the ability to control and screen travellers crossing the borders."
The central bank anticipates foreign tourist arrivals of 5.5 million in 2021, but admits a lower projection is highly plausible.
The economy is forecast to expand by 3.2% this year, but a lower GDP growth is likely on the back of increasing downside risks, according to the central bank.
The near-term economic recovery would depend on the resolution of the recent outbreak and concomitant fiscal support, while the medium-term recovery would hinge on several factors related to tourism recovery, domestic vaccine distribution, fiscal stimulus and labour market conditions, according to the minutes.
The procurement and distribution of the coronavirus vaccines in the country will have implications for domestic economic activities and Thailand's reopening policy.
Fiscal support will have to be assessed in terms of magnitude and duration, said the minutes.
Fragile labour market conditions, meanwhile, could yield an impact on private consumption.
Although the impact of the recent outbreak on the economy would be less than last year, the pace of the recovery would be slower and more uneven among different sectors and firms, said the minutes.
Small and medium-sized enterprises have been affected more than large corporates, hence concerns over increased vulnerabilities in the labour market, particularly for daily-hired and self-employed workers in the non-farm sectors along with workers in the hotel industry.
Some 4.7 million workers are at risk of severe income losses, said the minutes.
"These include daily-hired and self-employed workers in non-farm sectors, as well as workers in the hotel industry. Among these workers, around 1.2 million could become unemployed or underemployed."
The unemployment rate was at 2% in November, down from 2.1% in October, and 783,760 people were out of work, slightly less than the previous month's tally of 810,190.
"The [MPC] views that the public sector should implement more targeted measures in a sufficient manner and these measures should be front-loaded at the onset of the negative shocks to prevent negative feedback on the economy and mitigate long-term economic scars."
The targeted measures include fiscal spending on relief measures, measures alleviating businesses' debt burdens and expediting budget disbursements to sustain the momentum of fiscal policy.