Thai Finance Ministry cuts GDP outlook after deadly Covid wave

Thailand’s economy is set to expand more slowly than previously expected this year as the country emerges from its deadliest Covid-19 outbreak, the Finance Ministry said. 

The ministry on Thursday lowered its gross domestic product forecast to 1% expansion, from 1.3% predicted in July. It’s the ministry’s fourth revision this year after a wave of cases that began in April triggered restrictions on businesses and travel that crippled growth.

Southeast Asia’s second-largest economy is likely to grow 4% next year, supported by exports and tourism, according to Pornchai Thiraveja, director general of the ministry’s fiscal policy office. The ministry earlier had forecast growth as fast as 5% for 2022.

Output will accelerate next year after restrictions ease, driven by tourism and local demand, Pornchai said in a briefing, with fiscal support continuing to play a key role. The ministry has been in close talks with the Bank of Thailand and is ready to take further measures if necessary, he said.

The Finance Ministry is the latest of Thailand’s three key agencies to adjust forecasts for the tourism- and trade-reliant economy, as policy makers respond to the pandemic with a combination of containment measures and fiscal support. Economic growth is seen rebounding to 3% in the final quarter of 2021 from the 3.5% contraction expected in the preceding three months, when much of the nation was under quasi-lockdown.

Weak Baht

The Bank of Thailand last month cut its GDP forecast to 0.7%, while the National Economic & Social Development Council followed with a downward revision to 0.7%-1.2%. Those revisions came after new infections jumped to more than 20,000 a day, but the caseload has dropped to 8,000-9,000 per day in recent weeks. 

The Finance Ministry forecast the average baht will weaken to 31.93 to the dollar this year and 32.70 next year, compared to 31.30 in 2020. The currency is down 10% against the dollar this year, making it the worst performer in Asia, according to Bloomberg.

An expected recovery in tourism should provide support to the baht next year, Pornchai said. Prime Minister Prayuth Chan-Ocha has eased some Covid curbs in recent weeks and unveiled a plan to welcome vaccinated foreign tourists from Nov. 1.     

The cabinet last week approved a slew of stimulus measures worth 92 billion baht ($2.8 billion) to reduce the cost of living, boost domestic consumption and support the economy. That’s on top of billions of dollars in fiscal support unveiled during the pandemic to minimize the hit to the economy.