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Central bank worries virus impact could drag growth below 2 per cent

Feb 14. 2020
Don Nakornthab, senior director at the Bank of Thailand/ File Photo
Don Nakornthab, senior director at the Bank of Thailand/ File Photo
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The Thai economy could be hit hard if the new coronavirus (Covid-19) outbreak is prolonged, Don Nakornthab, senior director at the Bank of Thailand, said on Thursday (February 13).

The economy is already weighed down by the impacts of the delay in implementing the annual budget and the impact of the drought.

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The Tourism Authority of Thailand estimates that the number of foreign tourists this year might drop by 5 million, which would result in revenue loss of Bt250 billion this year, due to the impact of the Covid19.

“If so, the impact on the economy will be large and it will lower growth rate by 1.5 percentage points. Earlier the central bank had forecast growth rate at 2.8 per cent. The virus impact could slash growth to just 1.3 per cent,” he warned.

The tourism sector makes up 20 per cent of gross domestic product (GDP) and employment in related businesses including hotel, restaurants, retail, logistics represent 40 per cent of labour force. The farm sector accounts for 40 per cent of labour force, but the sector faces a severe drought this year.

The only hope for the economy is through government spending, but the annual budget for fiscal 2020 has been delayed as Parliament has to revote the draft bill following the Constitutional Court’s ruling, he lamented.

The country depends too much on Chinese tourists, who represent 27 per cent of total visitors. As China has become the epicentre of the virus outbreak, Thailand needs to find alternate sources for tourists, he said.

If the country faces a sharp decline in tourists, then the current account surplus this year would be much lower. Investors may no longer see the baht as a safe-haven currency as in the past, he added.

Somjai Phagaphasvivat, a political scientist, said the government has to work hard under unfavourable circumstances in order to shore up economic growth between 2 to 2.2 per cent, compared with 2.5 per cent last year. Thai household debt is equivalent to 79 per cent of GDP, the highest in Asean and the second highest in Asia, which will erode the purchasing power of consumers, he added.

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