The Thai economy in 1H21 grew more than previously assessed, as seen from economic indicators in 2Q21 which rose 7.5 percent YoY, mainly due to a low base effect and accelerated export growth. As a result, the Thai economy grew 2.0 percent YoY during the first half of 2021. However, the Thai economy expanded only 0.4 percent QoQ, which indicates that it still has a weakened momentum owing to the effects of the COVID-19 outbreak.
Since the economic impact from the latest COVID-19 outbreak has proven to be more severe than previously forecast, KResearch has revised downward Thailand's economic growth forecast from 1.0 percent to -0.5 percent. The ongoing wave of the COVID-19 pandemic tends to become increasingly devastating and prolonged compared to the previous assessment in July 2021. Based on the COVID-19 situation at present, the number of daily cases is expected to reach its peak in September 2021 before tapering off gradually. However, the situation is not expected to come under control in the immediate future, and daily COVID-19 infections may not dip below 1,000 people any sooner than 4Q21.
Therefore, the Thai government will likely maintain strict lockdown measures for at least another two months (starting July 2021), which would subsequently put more pressure on the economy. While the government has implemented multiple stimulus packages to ease the burdens of businesses and their employees that have been directly impacted by the partial lockdown, such measures are unlikely to entirely offset such impacts. Although the government may slowly relax lockdown restrictions on certain business, consumer confidence would not return to normal as long as the number daily COVID-19 cases remains high amid a relatively low percentage of fully vaccinated population. This would in turn keep economic activity from recovering quickly.
Regarding the impact on the tourism industry, the number of inbound tourists to Thailand may be lower than expected due to growing concerns over the pandemic as the Delta variant has caused massive spikes in COVID-19 cases within many countries, including Thailand. For this reason, KResearch projects that the number of foreign tourists entering Thailand this year may drop to approximately 150,000 people.
Meanwhile, the Thai manufacturing sector faces heightened risk from outbreaks found at factories, which may also have an impact on the export industry, this year's principal economic driver. Furthermore, it could lead to domestic goods shortages at certain times this year. Nevertheless, the global economic recovery – particularly that of the US and EU – and the weakening Baht should help Thailand to achieve high export growth in 2021.