The Thai economy in 2Q20 shrank by -12.2 percent YoY, a lesser decline than the market expectations of -13.0 to -17.0 percent YoY, due to a resurgence in government spending and investment in 2Q20. This surge occurred amid the issuance of several stimulus packages, in particular the relief measure under the “Stronger Together" program which saw cash handouts of THB 5,000 distributed to those in need for three consecutive months during 2Q20. Meanwhile, the annual rate of budget disbursement in 2Q20, including current expenditure and capital expenditure, was higher compared to the same period from the previous year. Such growth in government investment has led to further expansion of the construction industry in 2Q20. KResearch assesses that the Thai economy will likely see the sharpest contraction in 2Q20 and continue to shrink gradually for the remainder of the year.
Looking ahead, the Thai economy remains highly unpredictable, based on the risk-laden global economic trends. Tension between China and the US has shown signs of escalation, while developments in US politics continue to be shrouded in great uncertainty. Although the COVID-19 pandemic has largely been unmanageable, some progress has been made in the development of vaccines. However, the effectiveness of such vaccines is still undetermined, and it will likely require considerable time before they can be manufactured for global distribution. In addition, the Baht is set to keep strengthening due to the weakening US Dollar. Just as risks multiply in the US economy, and the global economy falls deeper into recession, the surging Baht will continue to put pressure on Thailand's exports and tourism sector for the foreseeable future. Furthermore, Thai politics still offer a muddled picture and warrants continuous observation. For this reason, KResearch has made a preliminary projection that the Thai economy for 2020 will shrink beyond prior projections, at -6.0 percent YoY.
Given the fluid situation, the government is poised to issue additional economic measures to sustain the weakened Thai economy. This new round of stimulus packages will be formally announced via news conference on August 19, 2020, and is expected to focus primarily on boosting employment and assisting SME and Micro SME operators. KResearch will keep a close watch on upcoming measures in order to reassess the economic growth, which will require adjustment.