Wednesday, August 05, 2020

Krungsri Research reckons Thai economy will only fully recover in last quarter of 2022

Jun 18. 2020
Dr Somprawin Manprasert
Dr Somprawin Manprasert
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Krungsri Research expects the Thai economy to make a U-shaped recovery and return to pre-outbreak levels by the fourth quarter of 2022, though sectors affected by the spread of Covid-19 will recover at different times.

Dr Somprawin Manprasert, chief economist and head of Krungsri Research, said: “The Covid-19 outbreak has unprecedently affected the Thai economy. Thus, Krungsri Research is keeping its 2020 GDP projection unchanged at 5 per cent contraction and it is likely that the economy will gradually recover, while business sectors will have to adapt to new trends, which will be clearer in 2021.”

The Covid-19 outbreak has affected not just current economic activities, but also those that are medium- and long-term, in four ways: businesses forced to close due to lockdown measures, a drop in overall demand, disruption in global supply chains and a change in consumer behaviour.

These four points will determine a path of sectoral recovery. The sectors hit by the lockdown measures will have severely contracted, but they will also recover faster than other sectors.

However, sectors affected by the change in consumer behaviour will take a longer time to recover, so therefore, relief measures and business adjustments will be different and vary depend on each sector’s path of recovery.

As per Krungsri Research’s analysis of the impact Covid-19 has had on the business sector, 26 out of 60 sectors or 46 per cent are severely affected by the outbreak. Meanwhile, 24 sectors are moderately hit, while 10 are only suffering mild impacts.

The research house expects the health and food-manufacturing sectors to return to the pre-outbreak level by 2021, while the retail, wholesale, electricity and natural gas sectors that have been severely affected, may rebound relatively faster than other business sectors.

However, sectors affected by the change in demand, such as airlines and hospitality industry, will take a longer time to recover.

Tourism is one of the key sectors to have sustained the largest damage from the outbreak, while sectors related to public gatherings, like concerts, performances or matches, will also take a longer time to recover.

“Most sectors in Thailand are unlikely to recover to the pre-crisis state by 2021, though Thailand has a strong health-management sector, which has allowed us to efficiently control the outbreak in the first half of 2020.

“However, the outbreak has severely affected the global economy and led to a change in daily behaviour. Hence, we expect the global economy to bottom out in the second quarter, though negative consequences will last into the next year,” Somprawin said.

"Funds from the government's relief measures will be released in the system in the third quarter, which will help shore up the economy.

"However, it remains to be seen whether assistance measures will be effective enough to revive the economy and able to create jobs that will generate more money to circulate in the economy and ensure that households have sufficient income to repay their debts thus mitigating risks in the financial sector, and whether there are appropriate measures to help each sector get back on the path to recovery," he added.

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