Finance Ministry cuts 2021 GDP outlook to 1.3% growth

Finance Ministry cuts 2021 GDP outlook to 1.3% growth

A shopping area around Asoke intersection is quiet after all department stores in Bangkok are ordered closed from July 20. (Photo: Varuth Hirunyatheb)
A shopping area around Asoke intersection is quiet after all department stores in Bangkok are ordered closed from July 20. (Photo: Varuth Hirunyatheb)

The Finance Ministry slashed its 2021 economic growth forecast on Thursday to 1.3% from a previously predicted 2.3% expansion, the third such revision this year, as the tourism-dependent country fights its biggest Covid-19 outbreak to date.

The latest outbreak has seen a surge in cases and deaths this month, leading to stricter containment measures, including travel curbs, mall closures and curfews amid a tourism slump.

"We have reduced our forecast quite a lot... but the range (of 0.8-1.8% growth) is still not negative," Kulaya Tantitemit, director of the Fiscal Policy Office, told a briefing.

The current outbreak has impacted economic activity and the expected number of foreign tourists this year, but improved exports and fiscal measures would lend some support, Ms  Kulaya said.

Foreign tourist spending generally accounts for 12% of Thailand's gross domestic product (GDP). In 2019, nearly 40 million foreign visitors spent 1.91 trillion baht.

Although Thailand is preparing to reopen, the ministry now expects only 300,000 foreign tourists this year, down from an earlier forecast of 2 million, she added.

"We expect about 200,000 foreign tourists in the fourth quarter, based on an assumption that the outbreak is contained and the number of infections drop before that quarter," Ms Kulaya said.

Increased exports and fiscal stimulus measures would prevent the economy from contracting this year, following a 6.1% economic slump in 2020, she said.

The ministry also raised its 2021 forecast for exports, a key growth driver, to a 16.6% rise from the 11% increase seen earlier as the global economy improved.

The government expects to use 200 billion baht of a new 500-billion baht borrowing plan this year to finance stimulus measures.

Ms Kulaya said the ministry was ready to implement additional support measures as appropriate as the fiscal position remained strong, and that the public debt to GDP ceiling of 60% can be raised if necessary.

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