Thai economy shrinks for the fifth consecutive quarter; relief measures remain important to alleviate household expense burdens

          The Thai economy in the first quarter of 2021 shrank 2.6%YoY, less than the market forecast of -3.3%, driven mainly by the global economic recovery and domestic stimulus packages. Meanwhile, the current outbreak of COVID-19 continues to have massive impacts on consumption and the tourism industry, despite the positive factors from economic stimulus and relief measures for those affected to boost purchasing power, including the “We Win” financial aid scheme, the “Let's Go Halves” co-payment program and the “Section 33 We Love Each Other” cash handout project.

           KResearch maintains its projection for the Thai economy in 2021 at 1.8%, as the ongoing COVID-19 pandemic and low vaccination rate will affect consumer’s confidence and behavior. This projection has taken into account the positive factors of the export growth due to the global economic recovery and the ongoing economic stimulus packages, including more economic stimulus measures expected under the central budget of the Fiscal Year 2021 Budget Act and the THB1 trillion emergency decree loan.

         However, the strong recovery in the global economy has pushed up commodity prices and inflation in Thailand, which will inevitably increase the cost of living for Thai households. With the Thai economy tending to recover more slowly than the global economy due to the severity of the COVID-19 pandemic, it is expected that the cost of living for Thai households will inevitably rise, resulting in household income and employment growth in Thailand inconsistent with the rising cost of living. Therefore, the Thai government may need to introduce more fiscal measures to alleviate household expense burdens, while monetary policy has a limited role in stimulating the economy amid the rising inflation.