Let me play the role of Nostradamus

Let me play the role of Nostradamus

People are downloading an app to access state assistance for tour programmes. (Photo by Chakkrapan Natanri)
People are downloading an app to access state assistance for tour programmes. (Photo by Chakkrapan Natanri)

Time flies. The dreadful year of 2020 is coming to a close. Therefore, I've decided to have fun by writing something "comical". No earth-shattering economic analysis. That will be the next article. This week I will make educated predictions of things that might happen in the year 2021. I am no fortune teller, but I will try my best.

At the beginning of the year, a major fortune teller predicted that 2020 was the year of the god Ganesh who would bring economic prosperity and happiness to Thailand. I think he meant the god Covid who brought economic disaster to all Thais. The same fortune teller also warned that student protesters would burn down Thammasat University to ashes and trigger the worst bloody coup d'etat in history. The university remains unscathed and, so far, there has been no coup d'etat of any kind. I promise you my predictions will be more accurate.

Here goes.

First prediction

Thai Airways (THAI) will never fly in 2021, or ever. I do not need a star chart to read Thai Airways' fortune. I just look at the slow recovery of the world economy, administrative problems with Covid-19 vaccinations, and conservative consumer behaviour. All these point to much less air travel for both leisure and business next year and beyond. For safety reasons, most airlines will require "approved and valid" Covid vaccination certificates before passengers board any plane. A small percentage of would-be passengers will have that in 2021.

All airlines, not just THAI, will suffer another year of low patronage, huge financial losses, and severe cash shortages. The problem is THAI has no government or commercial banks to provide financial support and, most likely, cannot survive another year of almost zero income. With no revenue, Thai Airways will need 3-5 billion baht a month for operating costs such as salary and aeroplane parking space rent. Operating costs will double or triple once the airline resumes its normal business. Therefore, hefty working capital of 10 billion baht is required. Where will the money come from? I doubt that selling aircraft like the company is doing now is the solution, especially when the whole airline industry has no demand for more aeroplanes.

To make matter worse, starting next July, THAI has to begin paying compensation to 5,000 volunteer departed employees. More money and more pa-tong-ko (deep-fried dough), please.

Second prediction

Covid-19 vaccines will not be as effective as hoped. They will not be total failures but will need to be revised and adjusted several times before they become effective on the mass population. I have read Pfizer's vaccine test report. It is quite credible which is the reason why many governments have no problem authorising the use of the vaccine. The problem, to me and to many doctors, is that test subjects are carefully screened to be absolutely healthy which the general public is not. Obesity, high blood pressure, diabetes, allergies and so on are common in the general population. You know what? I have all of the conditions mentioned. Therefore, these vaccines have to be tested in the real world of a population of billions before their effectiveness against Covid-19 is certain. I am keeping my fingers crossed though.

However, one of the most concerning issues is how to administer the vaccination to the masses. According to a doctor friend of mine, Thailand has never administered more than 2 million shots of vaccine a year. To vaccinate 26 million doses ordered from AstraZeneca is a very challenging task. By the way, do readers know that two doses are needed per person? The second dose will need to be given a month after the first one. One person has to go to hospital twice for the complete vaccination. Be prepared for a super-long line for vaccination at hospitals. Rest assured, I will not be waiting in line.

Third prediction

Half of the tourism industry will go bankrupt in 2021 and will not fully recover for at least five years. The second half of the sentence is important. It reads that if you are in the tourism business, it is wiser to close the business now rather than wait five years for the industry to fully achieve the 2019 income level. Close the business today to avoid further operating losses and save your precious cash.

I know this is not much of a prediction as it is a well-known fact. The situation is no different to the airline industry. Thai Airways knows that it is most likely to lose half of its customers in the future. So, it is selling half of its fleet and letting go half of its staff. Those of you in the tourism industry need to think similarly.

Fourth prediction

The government will not be of much help in stimulating the economy next year. This is another non-prediction issue as it is almost a fact. When it comes to the subject of the economy, I am more accurate than Nostradamus. The weak economy means less revenue for the government. Japan's tax revenue this year is estimated to be 12.6% lower than targeted due to its weak economy. The Thai government must be experiencing the same fate. The difference is that the Japanese government is able to borrow from the public to cover its revenue shortfall; the Thai government cannot. Our government can only cut expenses. Our finance minister will reject any projects that require large funding.

Fifth prediction

The gold price will skyrocket in 2021. For two factors. The depreciation of the Thai baht and rising world gold price (in terms of US dollars). I know my prediction goes against the current trend of a strengthening baht and plummeting gold prices. The 100-year movement of gold prices and the trend of the Thai external account leads me to such a bold prediction. First, the Biden government will be supportive of pumping more dollars into the economy, particularly on social programmes and unemployment benefits. His programmes will likely weaken the dollar while pushing up world gold prices. Second, Thai trade and current account surpluses will worsen which will lead to a devaluation of the currency.

Predictions are predictions. They should be taken with a grain of salt.

Chartchai Parasuk

Freelance economist

Chartchai Parasuk, PhD, is a freelance economist.

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