Thai Q2 GDP thumps forecasts, but COVID-19 hampers recovery
17 August, 2021
Thailand's economy unexpectedly grew in the second quarter from the first helped by exports and government spending, but spiking COVID-19 cases continue to batter domestic activity and tourism, restraining its fragile recovery.
The government cut its 2021 economic growth forecast to 0.7-1.2per cent from 1.5-2.5per cent, the third time it has done so, as it battles to contain its biggest COVID-19 outbreak amid a slow vaccination rollout. The economy slumped 6.1per cent last year.
Thailand's biggest COVID-19 outbreak so far has seen a spike in cases and deaths, prompting tougher containment measures in Bangkok and nearby provinces in July before being extended this month and expanded to areas which account for around 80per cent of GDP.
Southeast Asia's second-largest economy grew a seasonally adjusted 0.4per cent in the second quarter from the previous quarter, data from the National Economic and Social Development Council showed, versus a forecast 1.4per cent drop in a Reuters poll.
From a year earlier, gross domestic product (GDP) grew 7.5per cent in the June quarter, beating the 6.4per cent rise forecast by economists, due largely to a GDP slump last year when the pandemic first hit.
"While today's release was a bright spot, headwinds remain large with the effect of the Delta variant", said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
Policy support from monetary, fiscal, and medical remain paramount to prevent the Thai economy from a double-dip recession, he said. "Any easing of the policy rate needs to be supplemented with the distribution to the real sector or else, it remains a purely academic exercise".
In early August, the Bank of Thailand's (BOT) policy committee voted 4-2 to hold the key rate at a record low 0.5per cent, with two members favouring a cut. Last week, BOT Governor Sethaput Suthiwartnarueput told Reuters interest rates were a "blunt tool".
The baht was little changed after the GDP data while the stock market dropped 1per cent but pared losses.
The economy has yet to slip into a recession but momentum has slowed since the widespread outbreak began in April, NESDB head Danucha Pichayanan told a news conference.
"If the outbreak cannot be contained in the third quarter and the lockdown is not eased in the fourth quarter... the economy could grow less than 0.7per cent this year," he said.
However, increased exports and fiscal measures have lent some support. The NESDC now expects exports to grow 16.3per cent this year versus a 10.3per cent rise projected earlier.
But it predicts only 150,000 foreign tourists this year, down from 500,000 seen previously, and against 40 million foreign visitors in 2019.
The latest outbreak has accounted for most of Thailand's total cases and deaths at a time when it was preparing to reopen more broadly to foreign visitors.
Thailand could see coronavirus cases double to 45,000 per day by early next month, even with the current lockdown, according to its COVID-19 taskforce.
Anti-government protests calling for the resignation of Thailand's prime minister over the handling of the COVID-19 crisis and its impact on the economy has also raised political uncertainty and worries over policy continuity, analysts say.
This year, the government approved a further 500 billion baht (US$15 billion) borrowing for relief measures.
Source: www.channelnewsasia.com