Economy shrinks less than expected, 2021 outlook raised as tourism revival eyed

Economy shrinks less than expected, 2021 outlook raised as tourism revival eyed

Staff members prepare to open a restaurant on Nov 1, 2021, the first day of coronavirus restrictions lift on retail and dining in Bangkok and other high-risk areas to revive the economy. (Reuters photo)
Staff members prepare to open a restaurant on Nov 1, 2021, the first day of coronavirus restrictions lift on retail and dining in Bangkok and other high-risk areas to revive the economy. (Reuters photo)

Thailand's economy contracted less than expected in the third quarter as businesses started a slow recovery from the coronavirus-driven slump in activity, while the reopening of the tourism sector raised hopes of a steady revival.

The government upgraded its economic growth outlook to 1.2% this year, compared with a previous forecast of 0.7%-1.2% expansion, and projected 3.5%-4.5% growth in 2022, thanks to an easing of Covid-19 curbs and a reopening to overseas travellers to reboot its vital tourism industry.

Southeast Asia's second-largest economy tumbled 6.1% last year.

The economy shrank a seasonally adjusted 1.1% in the September quarter from the previous three months, data from the National Economic and Social Development Council (NESDC) showed, versus a forecast 2.5% drop in a Reuters poll, and a revised seasonally adjusted 0.1% growth in the June quarter.

From a year earlier, gross domestic product (GDP) shrank 0.3% in July-September, a shallower than expected fall than the forecast 0.8% drop, and against a revised 7.6% growth in April-June.

"We expect GDP to rebound strongly in the final quarter now that cases are falling, restrictions are being lifted and the vaccine rollout is gaining momentum," said Gareth Leather, senior Asia economist at Capital Economics.

NESDC secretary-general Danucha Pichayanan told a news conference that economic indicators pointed to improving conditions and the government was considering introducing more measures to boost consumption before the New Year.

"If there are no more outbreaks, the fourth quarter will definitely be better than the third," he said, adding that domestic consumption, public spending and tourism will drive growth in 2022.

Increased exports and fiscal measures helped to limit the fallout from the pandemic. The NESDC expects exports to grow 16.8% this year versus a 16.3% rise seen earlier. In 2022, it predicted 4.9% export growth.

Exports in the third quarter grew 15.7% from a year earlier, but private consumption was hurt by the Covid-19 curbs and dropped 3.2%.

The agency predicted 200,000 foreign tourists this year, compared with 150,000 seen previously, and forecast 5 million visitors next year. There were 40 million foreign tourists in 2019.

With a fraction of foreign tourists expected compared with pre-pandemic levels, most analysts expect the economic recovery will be slow.

"Beyond the fourth quarter, the prospects for the recovery hinge on how quickly the tourism sector recovers," Capital Economics' Leather said.

The government has introduced billions of dollars of relief measures to help revive the economy while the central bank has left its key rate at a record low of 0.50% since May 2020.

Takit Chartchredsak, an economist at Asia Plus Securities, said interest rates are expected to remain unchanged through 2022 to support the economic recovery.

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