The Bank of Thailand on Wednesday slashed its economic growth forecast this year to 3% from 3.2% made in December, given the impact of the second wave of Covid-19 infections and tepid tourism.
Titanun Mallikamas, secretary of the central bank's Monetary Policy Committee (MPC), said the second wave of infections that emerged in December resulted in a sharp drop in foreign tourist arrivals.
The bank trimmed its projection for foreign arrivals this year to only 3 million from 5.5 million.
"With tourism contributing up to 12% of GDP, Thailand's economic recovery is on a slower pace than other countries that rely less on tourism," he said.
A significant decline in overseas travellers is expected to take a heavy toll on GDP in the first quarter this year, reducing it below the percentage of the previous quarter, said Mr Titanun.
The state planning agency National Economic and Social Development Council reported on Feb 15 that the economy in the fourth quarter of 2020 declined by 4.2% year-on-year, improving from a contraction of 6.4% in the previous quarter, a 12.1% fall in the second quarter and a 2.1% drop in the first quarter.
After being seasonally adjusted, the economy grew 1.3% quarter-on-quarter from the third quarter.
For the full year 2020, the economy shrank 6.1%, compared with growth of 2.3% in 2019.
Last year's 6.1% contraction was the worst full-year performance in 22 years since the 7.6% decline in 1998 as a result of the Asian financial crisis.
The Bank of Thailand forecasts the economy will take around 2.5 years to recover to the same level as before the pandemic.
That timeline puts Thailand's economy at the pre-pandemic level by the middle of 2022, said Mr Titanun.
He said the MPC yesterday also voted unanimously to maintain the policy rate at 0.50% for a seventh straight meeting, aiming to support an economic recovery that remains highly uncertain.
Despite the downgrade on growth this year, the central bank predicted the economy would expand by 4.7% in 2022, mainly supported by a fast recovery in merchandise exports, in line with the expansion of trading partner economies as well as stimulus measures recently announced.
Amid the global economic recovery, the Bank of Thailand upgraded its export growth outlook to 10% this year from 5.7% earlier.
The improving economic momentum of trading partners is the key factor supporting export growth, said Mr Titanun.
US stimulus measures support the dollar's appreciation, easing pressure on the baht against the US dollar.
Thailand's lower current account surplus also supports a weaker baht against the greenback.
With Thailand's uneven economic recovery, the MPC believes the continuity of government measures and policy coordination among state agencies will be critical to support recovery going forward.