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16 Nov 2020

Thai Economy

Thai economy in 3Q20 recovered faster than expected; GDP for full-year 2020 to contract by not less than -7.0% (Business Brief No.3896)

  • ​The Thai economy in the third quarter of 2020 contracted by less than the consensus forecast of -8.0 percent YoY. The satisfactory recovery of economic activity in 3Q20 can be attributed in part to pent-up demand after the relaxation of lockdowns across many countries, including Thailand. The less-than-expected contraction in exports wherein KResearch has revised down its growth projection from -12% to -7.0%, and improved public spending in both consumption and investment have mainly contributed to a less-than-expected contraction of the Thai economy in 3Q20. Although the third quarter marks the end of the government's “Thailand Stays Strong" scheme, which provided THB 5,000 in cash relief to people affected by the pandemic over a period of three consecutive months, household expenditure has strongly rebounded from the second quarter, even if still in contraction mode. The improvement reflects a surge in pent-up demand following the relaxation of lockdowns across the country. The Thai economy in 4Q20 is expected to contract at a level almost on par with the third quarter amid the implementation of measures to encourage household spending. KResearch projects that the overall Thai economy in 2020 will contract by not less than -7.0 percent.
  • The trend of  the Thai economic recovery in 2021 is still set to encounter a myriad of uncertainties, including global economic risks, pressure induced by the strengthening Baht, and political unrest in the country. Issues merit close watch are as follows:

    ​- The spread of the novel coronavirus has again intensified in the US and Europe, leading to reissuance of lockdown measures in many European countries. While the financial markets have responded very positively to the considerable progress made in COVID-19 vaccines during their trial periods, KResearch maintains a measured view regarding access to the vaccines on a global scale, which is anticipated to happen no sooner than late 2021 due to limitations in making them available to the global communities, whether it is the -70 degrees Celsius storage requirement of particular vaccines during shipping, people's willingness to accept the vaccines, or the time needed for the vaccines to generate immunity among recipients.

    - The US economy remains fraught with risks. The transition of power in the US is occurring at a pivotal point in the country's COVID-19 crisis, wherein the number of cases has risen to 200,000 people per day. Meanwhile, the enforcement of measures to control the pandemic is still under the executive power of President Donald Trump, who will officially leave office on January 20, 2021. Additionally, based on current 2020 US election results, there is a high possibility that the Republican Party will be able to secure a majority in the Senate – which would make the passing of new legislation, especially large stimulus packages, much more difficult.

    - Uncertainty faced by the Thai economy has not diminished. The recovery of the global economy amid the pandemic – which remains out of control – may affect plans to reopen the country, limiting the number of inbound tourists in 2021 to a much smaller figure than previously planned. On the other hand, the strengthening Baht continues to affect export revenues. Such factors affecting income from overseas will in turn impact employment, household spending and asset quality in the financial system. Furthermore, political unrest looks to be another pressing issue that will make its way into 2021.


Thai Economy

GDP