The Bank of Thailand (BoT) has slashed the country's economic growth forecast again for this year to 1.8% from an earlier projection of 3%, due to lower foreign tourist arrival estimates and lower domestic demand due to the third wave of Covid-19.
Under the downside risk outlook, the central bank has revised its forecast of 2021 foreign tourist arrival numbers to 700,000 from 3 million earlier. It has also revised down offshore travellers for 2022 from 21.5 million to 10 million.
The central bank also cut the economic growth forecast for 2022 from 4.7% to 3.9%.
The prediction of 1.8% GDP growth is based on the assumption that the third wave of the outbreak can be contained in the third quarter and herd immunity achieved by early 2022.
Due to the third wave, Thai economic recovery will be slower and more uneven compared to the previous forecast, said secretary of the BoT's Monetary Policy Committee (MPC), Titanun Mallikamas.
Downside risks to the economic outlook remain, especially over the possibility of the outbreak in Thailand and abroad becoming more severe owing to virus mutations.
In the case that the government cannot manage to contain the third wave or a rise of new infections abroad, foreign tourism arrivals will be lower than the estimate of 10 million for next year.
"Because of slower and uneven recovery, the Thai economy would recover in a W shape," Mr Titanun said.
Though the government has already booked 105 million doses of vaccines, the BoT believes there is still risk from more severe outbreaks ahead in Thailand and globally due to the emergence of new variants and possibly less effective vaccines. The key is to procure adequate vaccines and distribute them at the right time to mitigate risks on the local economy, especially in the next 4-6 months.
The MPC will keep a close watch on the situation and will ask all parties to speed up relief measures to steer the economy out of the crisis.
However, the central bank upgraded the country's export growth assessment for this year, up from 10% to 17.1% supported by global economic recovery, which will lead to higher external demands.
If Thailand can overcome the third wave, it would support the country's domestic consumption for next year due to pent up demand. Despite this, the central bank has forecast the domestic consumption growth rate for 2021 down from 3% to 2.5% and increased the growth rate for next year from 2.7% to 3.4%, he said.
Meanwhile, a MPC meeting on Wednesday voted unanimously to maintain the policy rate at 0.50%, according to Mr Titanun.
The committee believes financial measures, particularly special loan facilities for businesses as well as debt restructuring, should be expedited. These steps would reduce financial burden on businesses and households affected by the outbreak in a more targeted manner than cutting the policy rate, which was already low.
Thus, the committee voted to maintain the policy rate at the meeting and will stand ready to use the limited policy space at the right time, Mr Titanun said.
The committee views the continuity of government measures and policies as well coordination between government agencies as critical in supporting economic recovery impacted by the new outbreak. Short-term measures to accelerate the procurement and distribution of vaccines will prevent the outbreak from being prolonged.
Fiscal measures will also play a crucial role in driving economic recovery amid uncertainties. Thus, the government should accelerate the disbursement of relief and other fiscal support measures to provide adequate and continuous economic stimulus as well as address vulnerabilities in the labour market.
According to the MPC, monetary policy must remain accommodative. The new financial rehabilitation measures to support business recovery post-Covid-19 and other measures by specialised financial institutions (SFIs) should accelerate the distribution of liquidity to affected groups in a targeted manner, reduce debt burden and support economic recovery.
In addition, financial institutions should accelerate debt restructuring. The BoT will closely monitor the progress and assess the efficacy of financial and credit measures.