Committee cuts GDP forecast to 0-1.5% amid latest outbreak

Committee cuts GDP forecast to 0-1.5% amid latest outbreak

A pedestrian walks past the entrance to Bang Kapi market in Bangkok which recently reopened after being closed temporarily in June. Pornprom Satrabhaya
A pedestrian walks past the entrance to Bang Kapi market in Bangkok which recently reopened after being closed temporarily in June. Pornprom Satrabhaya

A private sector council has cut Thailand's economic growth projection this year to 0-1.5%, mainly due to the prolonged Covid-19 outbreak.

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) decided to slash the country's gross domestic product (GDP) forecast for this year to 0-1.5% in Wednesday's meeting from an earlier estimate of 0.5-2%.

Payong Srivanich, chairman of the Thai Bankers Association (TBA), said the prolonged outbreak and spread of the virulent Delta variant had led to stringent measures by the government to contain the outbreak. The stronger measures have impacted economic activities, employment and labourers' income.

Moreover, travel restrictions and quarantine measures will significantly impact domestic tourism in the third quarter of this year. At the same time, it will also affect the country's reopening.

Meanwhile, the improvement of Thai exports, in line with global economic recovery, is the only engine supporting the country's economic growth this year.

JSCCIB has revised up its Thai export growth forecast to 8-10% this year, up from 5-7% previously. However, the Thai economy still needs both fiscal and monetary policies to support growth.

Recently, the Bank of Thailand (BoT) slashed the country's economic growth forecast for this year to 1.8% from an earlier projection of 3% due to low foreign tourist arrival estimates and low domestic demand due to the third wave of Covid-19.

Mr Payong said the prolonged outbreak has affected the business confidence index conducted by the central bank. The survey in June found that most business operators believe recovery would occur in the second half of 2022, a delay of six months made by an earlier projection.

Given the downside risk, the private sector council has proposed to increase loan guarantees by Thai Credit Guarantee Corporation (TCG) under the BoT's soft loan scheme from the existing guarantee ratio at 40% of credit line and waive fees for the first to the third year.

The Federation of Thai Industries (FTI) proposed in the meeting on Wednesday that the TCG increase the credit guarantee ratio to 70%. The incentive should be offered to only small and medium-sized enterprises (SMEs) affected by Covid-19.

The JSCCIB has also proposed the central bank to separate non-performing loans (NPLs) prior to Covid-19 from current NPLs or businesses that have been impacted by the pandemic as financial assistance should focus on SMEs which are struggling due to the outbreak.

The FTI chairman, Supant Mongkolsuthree, said the government should speed up vaccine procurement and distribution. In particular, labourers in the manufacturing sector and factories have to be vaccinated to maintain the country's export sector, which is a key engine for the Thai economy amid the crisis.

The private sector has provided the government assistance with 25 vaccination centres, which have the capacity to administer 80,000 doses per day, however, it has had not received vaccines at these centres. So, the government needs to speed up vaccinations as this is a key factor to help the country overcome the high infection rates.

"If the government cannot manage to vaccinate or reopen as planned, there might be no foreign tourism and it is possible there might be 0% GDP growth or even a contraction this year," Mr Supant said.

In addition, the Thai Chamber of Commerce chairman, Sanan Angubolkul, said the government should have a clear stance on alternative vaccines as a third booster dose. This will build the confidence of Thais, foreign tourists and offshore investors and support the Thai economic momentum.

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