The economy is forecast to shrink by 8.5% this year as the pandemic dampens exports and foreign tourist arrivals, says the Fiscal Policy Office (FPO).
The melancholy outlook is based on expectations of an 11% plunge in full-year exports and 6.8 million foreign tourist arrivals, a far cry from the 2.7% export contraction and 39.8 million arrivals in 2019.
The think tank forecasts an average 4.1% GDP decline across Thailand's 15 major trading partners, while the baht's value against the US dollar is expected to average 31.70 this year.
The FPO's projection is in line with the Bank of Thailand's view of an 8.1% full-year contraction but is far greater than the declines of 6.7% and 5% predicted by the International Monetary Fund and the World Bank, respectively.
A full-year contraction of 8.1-8.5% represents the worst official forecast for the main economies of Asia and would be Thailand's biggest GDP contraction ever, surpassing the 7.8% decline in 1998 in the wake of the Asian financial crisis, according to Bloomberg.
Based on economic indicators, the domestic economy bottomed out in the second quarter with a double-digit GDP contraction, said FPO director-general Lavaron Sangsnit.
The economy will gradually recover in the third and fourth quarters and the momentum will continue into next year, Mr Lavaron said.
Despite the anticipated GDP plunge, the government has more room to manoeuvre in terms of fiscal policy than during the 1997 crisis, while public debt and inflation data are also in better shape than they were 23 years ago, he said.
Thailand's economy in the first quarter shrank for the first time since 2014, by 1.8% year-on-year and 2.2% quarter-to-quarter on a seasonally adjusted basis, as the pandemic cut off tourist arrivals and shuttered business activity.
The outbreak is the main factor warranting further monitoring, while a coronavirus vaccine is anticipated by the middle of next year based on developments in countries working on an inoculation, Mr Lavaron said.
The FPO has assessed that the next stimulus measures will be related to spurring domestic consumption, but the timing for implementation will need to align with tourism stimulus measures.
"We do not expect that tourism stimulus measures will help rev up economic growth momentum that much, but we hope that a multiplier effect is distributed nationwide," Mr Lavaron said.
The FPO has determined that the remaining 200 billion baht for relief measures needs to be held onto in case of a second outbreak in Thailand.