Friday, August 14, 2020

BOT warns of even tougher second quarter for Thai economy  

Apr 30. 2020
Don Nakornthab
Don Nakornthab
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By The Nation

The Thai economy deteriorated last month, with worse to come in the second quarter, the Bank of Thailand (BOT) warned on Thursday (April 30).

Economic indicators for March showed a decline from February, said Don Nakornthab, senior BOT director.

Exports, private investment, household consumption and tourism were hit hard last month as the spread of the Covid-19 became more acute, he said.

Exports fell by 2.2 percent from the same period last year. Excluding gold, exports value contracted by 6.5 percent, largely due to weak of global demand as a result of the Covid-19 fallout, he said. BOT export statistics differ from those of the Commerce Ministry, which rely on Customs Department figures. The BOT does not count tanks shipped to Thailand for military exercises, or the return of leased aircraft to their owners abroad by Thai airlines. Customs Department statistics registered export growth of 4.17 percent last month.

However, after severe contraction in February, the value of imports in March expanded by 4.4 percent year-on-year, partly due to China reopening businesses. Excluding gold, imports expanded by 1.3 percent, said Don.

Private consumption dropped from the same period last year in almost all spending categories, as supporting factors including household income, employment and consumer confidence weakened.

The Manufacturing Production Index (MPI) contracted by 11.2 percent year-on-year, pressured by weakening domestic and external demand, and drought in Thailand. Private investment indicators contracted sharply from the same period last year, with the private investment index fell 7.8 percent in March. Large numbers of workers also lost their jobs.

Farmers hit by drought saw their real income decline, leading to a drop in household consumption. Tourists arrivals plunged by 76.4 percent to 819,000, after falling 42 percent in February. Tourist arrivals in April could fall by 99 percent, Don warned, amid government lockdown restrictions including a ban on incoming flights till the end of May, mandatory quarantine for all arrivals, and curfew. 

Only government spending remained positive in March, he said. Public spending (excluding transfers) rose for the first time in five months, due to disbursement of the 2020 budget.

“Contraction of the economy in the first quarter from January to March brings expectations of more of the same in April followed by a much larger contraction in the whole of the second quarter from April to June,” he warned.

The Bt1-trillion government stimulus package, worth 6 percent of gross domestic product (GDP), should help shore up the economy this year and next. Meanwhile the central bank’s loan facility to support small and medium-sized businesses is also relatively large, at 3 percent of GDP. Though the large stimulus packages will aid the economy, the BOT still forecasts a 5.3 percent drop in GDP this year before growth returns in 2021.

The challenge is how to channel the stimulus funds quickly to those who need them, said Don.

He predicted a U- or V-shaped recovery, adding that an L-shaped economic scenario was possible but unlikely.

Thailand’s recovery would largely depend on how the global economy rebounded. The World Trade Organisation (WTO) forecasts global GDP will sink by 2.5 percent – or 8.8 percent in the worst case scenario – this year, before rebounding to grow at 5.9-7.4 percent next year. The WTO also projected world trade volume will fall by 12.9 percent, or 31.9 percent in the worst case scenario, before recovering in 2021 to grow at between 21.3 percent and 24 percent.

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