Thai economy to see 4% growth this year, says World Bank, but warns of downside risks


Thailand’s economy has been severely impacted by Covid-19 and is estimated to have shrunk by 6.5 per cent in 2020, with growth projected to expand by 4.0 per cent in 2021, according to the latest World Bank Thailand Economic Monitor report “Restoring Incomes, Recovering Jobs” released on Wednesday.

Thai economy to see 4% growth this year, says World Bank, but warns of downside risks
The report stresses that sustained employment recovery will be essential to helping the country bounce back in 2021 and 2022.

In 2020, weak global demand, a sharp decline in international tourist arrivals and domestic mobility restrictions depressed goods and services exports and private consumption, it said. Exports and private investment are estimated to have declined by 18.5 per cent and 4.4 per cent, respectively, while household consumption declined by 1.3 per cent.
The resulting declines in income have created economic hardship for many, though the government has made good progress in implementing a substantial package of measures to support households and firms, the report continued. Nevertheless, projections indicate that an additional 1.5 million people may have entered poverty in 2020 due to the economic impact from Covid-19, based on a poverty line of US$5.50 (2011 PPP) per day.
This year, the economy is expected to recover gradually, despite the second Covid-19 wave, and growth is forecast to pick up to 4.7 per cent in 2022. However, recovery remains vulnerable to downside risks, including from an extended resurgence of the pandemic resulting in a prolonged stagnation in tourism and domestic activity, a weaker-than-expected global recovery that could lead to continuing trade and supply chain disruptions, and high household debt levels, the report warned.
The pandemic has had a significant impact on Thailand’s labour market, with unemployment increasing especially among young people. The number of hours worked fell, as did monthly incomes. And while the decrease in the number of hours worked have not been restored to normal levels, employment in several sectors including manufacturing remains smaller than a year ago. This means the labour market is in a vulnerable position to confront any future shocks, including a resurgence of Covid-19, it said.
“The Covid-19 crisis and its economic impact have highlighted a key vulnerability for Thailand: the declining number of working-age people, which compounds the challenge of recovering the economic losses of last year,” said World Bank country manager for Thailand Birgit Hansl. 
“Improvements in employment, productivity and labour incomes, especially among the poor, will be necessary for a sustainable recovery,” Hansl added.
The report recommends that in the short term the government put in place training programmes to improve workers’ skills and provide financial support while they get back to work. Ongoing efforts are required to ensure that education and training matches the needs of employers. In the longer term, the government can increase employment in the care sector, make childcare more accessible and decrease its cost to help increase female labour force employment. 
The report also recommends increasing the retirement age and putting in place performance-based compensation schemes and flexible working arrangements to extend the working lives of older people.
“The decline in the working age population will reduce labour supply and economic output over the coming decades,” World Bank senior economist for Thailand Kiatipong Ariyapruchya said. 
“Good jobs will need to be created in high-productivity sectors associated with Thailand’s emerging knowledge economy. Policies to boost labour productivity and labour market participation of older people and women can help promote a sustainable recovery from Covid-19 while addressing challenges associated with an aging population,” Kiatipong added.