A long road to recovery for Thailand

A long road to recovery for Thailand

Siam Square is almost devoid of activity after the recent outbreak. (Bangkok Post photo)
Siam Square is almost devoid of activity after the recent outbreak. (Bangkok Post photo)

The OECD (Organisation for Economic Co-operation and Development) in last December's forecast raised its global GDP growth forecast for 2021 from 4.2% to 5.8% as of May 2021, primarily due to the achievement of Covid-19 vaccine rollout in developed nations. The GDP growth rate for the US is estimated to be as high as 6.9% this year -- an admirable rise from a contraction of 3.5% last year. The US is not the only economy that benefits from a quick vaccine rollout. The UK economy is projected to grow at an even higher rate of 7.5% in 2021 as more than 40% of its population has been fully vaccinated and about 60% of its population received at least one dose.

However, a high vaccination rate might not be the only factor responsible for higher GDP growth. Governments of these countries spent unprecedented amounts of money to stimulate their economies to counter the economic adversities of the pandemic. In fact, all spent more money on coronavirus stimulus packages in 2020/21 than the economic growth they might stand to gain in 2021. In other words, the money put in is less than the money coming out.

The US spent 14% of GDP on stimulus packages and is projected to receive 6.9% GDP growth while the UK spent 26% of GDP on the packages and is expected to get 7.5% in GDP growth back. Mind you, the US and UK are not the biggest spenders. Major European countries spent even more, particularly Germany, which spent 40% of GDP on stimulus packages.

It is clear that a high vaccination rate and opening up of the economy alone cannot guarantee a sharp economic rebound. A word of caution, though. The robust growth that we are seeing now in developed nations is also a result of pent-up demand. After a year of lockdowns and lots of government free money in hand, consumers are not reluctant to spend more than they should. One can expect a gradual slowdown of world growth after the parties are over. Good news in developed economies; how about Thailand?

As of the end of May 2021, 3.6% of Thais had received at least one dose of Covid-19 vaccines and only 1.6% were fully vaccinated. A far cry from developed country standards of more than 50% of the population receiving one dose and 40% being fully vaccinated. Based on our government's vaccine rollout plan, Thailand is likely to achieve developed country standards by mid-October.

To get to that level, an average of 450,000 shots will have to be given per day until the end of the year. The number will increase to over 700,000 shots per day in October and November as people start to go back for their second shots.

I have reservations about the effectiveness of Covid-19 vaccines. Out of the top five countries with the highest vaccination rates in the world -- Israel, Canada, United Kingdom, Bahrain, and Chile -- the last two are having trouble controlling the outbreak. Bahrain is facing a Covid resurgence and has had to ask people to get third booster shots after six months of two full doses of the Sinopharm vaccine.

Noteworthy is Pfizer's mRNA vaccine which is chosen to be the booster. Chile's new daily infection cases are as high as the peak levels of June 2020 and April 2021 as if vaccines have no effect in deterring the outbreak. The primary vaccine used in Chile is Sinovac. In my view, different types of Covid-19 vaccines might yield different results.

I am for vaccination and have registered to be vaccinated on June 14th. However, I am rather annoyed when doctors "cherry-pick" data to present the public with the "goodness" of certain brands of vaccines. Why do they present us with data from a small town of 45,000 people in Brazil when there are 22.8 million Brazilians who already had two full shots? Would a conclusion on the effectiveness of a vaccine based on 22.8 million samples be more reliable than 45,000 samples? With biased presentation, I feel it is necessary to find facts by myself.

If Thailand has a successful vaccine rollout plan, the economy will reopen in the fourth quarter of this year after 50 million shots have been administered. However, the economy is unlikely to boom like in developed countries. What Thailand lacks is a big stimulus package to fully wake up the economy. People will be ready to spend, but alas there is no money to spend.

In the US, President Joe Biden offered US$1.9 trillion (593 trillion baht) in spending, equivalent to 8.9% of GDP, to boost its economy after Covid. A stimulus package equivalent to 8.9% of GDP for Thailand will be 1.4 trillion baht, not the 0.5 trillion baht package which is waiting to be approved by parliament.

It is far-fetched to hope that the Thai government will have vaccines in one hand and cash to splurge on stimulating the economy in the other. As I have emphasised many times, the government will have difficulty financing the 500 billion baht package owing to inadequate domestic liquidity.

Rumours have it that the new "Rao Chana" (We Win) scheme of 3,000 baht might be reduced to 1,200 baht paid over a six month period of 200 baht per month. This might be evidence of an increasingly cash-strapped government.

The Bank of Thailand governor suggested the economy might not recover until the first quarter of 2023 and the boss of Thailand's largest commercial bank thought that it might take as long as three years for the economy to return to pre-pandemic levels. If these opinions are accurate, both government and businesses will need to change their strategies.

Short-term cash hand-out programmes will not be useful because they last for only a few months while the economy will need at least another 18 months of support. Long-term, sustainable support programmes are needed.

For businesses, give up hope for a quick recovery and manage your debts wisely. Avoid creating more debt as much as possible. It is nice to keep your employees but make sure that you do not bankrupt yourself while being generous.

Chartchai Parasuk

Freelance economist

Chartchai Parasuk, PhD, is a freelance economist.

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