The economy is expected to expand this year more slowly than previously forecast because of a resurgence in coronavirus cases, the central bank said, singling out an uncertain recovery in tourist arrivals as a “major risk” to the medium-term outlook.
The latest outbreak that began in mid-December will have less impact on the economy than the initial wave, but the pace of recovery will be slower and uneven, according to edited minutes of the Bank of Thailand’s Monetary Policy Committee released Wednesday.
The government should prepare additional fiscal stimulus measures if the tourism-reliant nation can’t reopen for foreign visitors during the peak season from late 2021 to early 2022, it said.
A plan to fully reopen its borders was scuppered by the new wave of infections that triggered containment measures and travel curbs in much of the country, weakening private consumption and triggering higher unemployment.
The economy, which shrank the most since 1998 last year, will expand this year “at somewhat a lower rate” than the central bank’s December projection of 3.2%, the panel said.
“The committee deemed it important that the public sector should prepare a package of financial and fiscal measures corresponding to risks and economic development for each period going forward, and such policy package should be readily available if necessary,” according to the minutes.
External factors that could affect the pace of border reopening include travel restrictions from China and virus mutations that could reduce vaccine efficacy, the committee said. Local distribution of shots, the public’s willingness to take vaccines and the ability to control and screen cross-border travellers will be key to a tourism recovery, it said.
“It will be very difficult for the economy to go back to pre-Covid level without the return of foreign tourists,” Bank of Thailand governor Sethaput Suthiwartnarueput told the Thai-language TNN channel in an interview broadcast Wednesday.
“All the fiscal and monetary policies like soft loans and cash handouts are only playing supporting roles. They can only buy time to sustain the situation, waiting for tourists to come back,” he said.
Only 6.7 million foreign tourists entered Thailand last year, a fraction of the 40 million visitors in 2019 who generated more than $60 billion in revenues.
Earlier this week, the National Economic and Social Development Council lowered its estimate for 2021 tourist arrivals to 3.2 million.
The panel concluded the central bank and related agencies should be ready to implement additional monetary policy tools and financial measures, including extending measures due to expire this year, if necessary.
Around 4.7 million workers are expected to be at risk of severe income loss. These include daily-hired and self-employed workers in the non-farm sectors, as well as workers in the hotel industry. Among these workers, around 1.2 million could become unemployed or underemployed.