The Bank of Thailand is concerned about business closures and layoffs attributed to the prolonged Covid-19 outbreak, which is adding significant downside risks to the economy.
The central bank on Wednesday released the edited minutes of the Monetary Policy Committee (MPC) meeting last week, which revealed the financial position of businesses, especially those in the service sector, became more vulnerable, which could lead to widespread business closures and layoffs.
The labour market is becoming more fragile, particularly the service sector and the self-employed, as both experienced income losses.
Sethaput Suthiwartnarueput, the central bank governor, said in a media conference on Monday employment has been declining, both in terms of higher unemployment and fewer working hours per day.
The combination of unemployed workers and employees working fewer hours reached 3 million in the second quarter this year, up from 1 million before the pandemic.
During the pandemic roughly 1.6 million unemployed people have returned to their hometowns, he said.
Most have shifted from the service sector to agriculture, earning a lower income.
The number of unemployed workers who have been out of work for more than one year rose to 170,000 in the second quarter this year, an increase of three times from the level before the outbreak.
The number of college graduates without jobs rose to 290,000, increasing by almost 90,000 from before the pandemic, said Mr Sethaput.
The minutes also revealed the MPC believes significant downside risks remain for the economy, given the outbreak in Thailand and other countries could become more severe.
Virus mutations could reduce vaccine efficacy, while slow vaccination progress could cause a more prolonged and severe public health crisis.
In this scenario, the economy would expand at a much slower rate due to stricter Covid-19 containment measures, which would impinge on economic activities and domestic demand.
The MPC recently assessed the economy was projected to expand by 0.7% and 3.7% in 2021 and 2022, respectively.
This is significantly lower than its June projection because private consumption slumped this year and foreign tourist figures are projected to be significantly lower next year, said the MPC.
The Thai economy this year is supported by merchandise exports in line with the global economic recovery led by developed economies, as well as public spending, according to the committee.