The think tank cuts growth prospects for 2021 to 1.9%
Exports and government stimulus neutralize third wave effects
Siam Commercial Bank’s Economic Intelligence Center (EIC) revised its growth forecast for the Thai economy this year to 1.9% from 2.0%.
The move takes into account its downward revision in tourist arrivals and the impact of a longer-than-expected national Covid-19 epidemic, as well as robust export support and government measures.
Yunyong Thaicharoen, chief economist of the center, said on Tuesday that the EIC forecast the Thai economy to grow by 1.9% in 2021 due to the resurgence of the virus, which he does not expect. it is contained before at least July.
This continuing epidemic will cause a significant drop in private consumption, especially for face-to-face activities, the EIC said.
Regarding tourism, the EIC lowered its projection of foreign tourist arrivals in 2021 to 400,000, from 1.5 million.
Despite Thailand easing lockdown measures, as it hopes to attract more foreign tourists, many countries are still imposing strict travel restrictions to curb new variants of the virus.
He said the deterioration in economic growth was minimal due to a strong expansion of exports in line with the global economic recovery, especially among developed economies with advanced vaccination rates.
In the first four months of 2021, Thailand’s non-gold exports increased 12.8% year-on-year. For the rest of the year, accelerating global growth, especially in developed countries, coupled with booming export commodity prices as commodity prices rise, is expected to improve shipments, said Mr. Yunyong, especially from May to July when the base was low.
Taking these factors into account, the EIC raised Thailand’s export growth outlook to 15% this year, from 8.6%.
Another important factor in projecting economic growth is government support, including a 240 billion baht loan under the 1,000 billion baht decree and a planned additional 100 billion baht under the new decree of 500 billion baht.
The government recently issued a 500 billion baht loan decree with a budget until next year.
The EIC expects the government to inject an additional 100 billion baht from this new budget decree in 2021.
Yunyong said the additional 500 billion baht of government borrowing was acceptable in theory, but in practice it should be disbursed cost-effectively to build confidence and reduce adverse effects on the economy. short term.
Cautious measures include accelerating the supply and distribution of vaccines, supporting people and small businesses affected by the pandemic and promoting employment, he said.
The EIC predicts that the Thai economy will gradually recover to pre-Covid levels by early 2023, but it still faces downside risks due to a long lockdown period and slow progress. vaccination, which could make economic recovery fragile and delayed.
The EIC also increased its projection of global economic growth for 2021 to 5.8%, from 5.6%.
The global recovery is being driven by the easing of lockdown measures in developed economies after rapid vaccinations, as well as significant and continued budget support.
Domestically, the economic damage from the third wave of Covid-19 cases could be greater than expected.
Even though the government has avoided strict lockdown measures to limit economic damage, the spread of the virus has caused residents to become more cautious about travel and curtailed their economic activities, Yunyong said.
“In our previous forecast, the EIC predicted that containment of the third wave outbreak could take up to three months. However, the situation has recently worsened as cases continue to rise and new clusters appear, ”he said.
We now expect this spate of infections to take up to four months to contain and cost around 310 billion baht in economic damage to private consumption, including losses from declining domestic tourism. “
Government budget support, along with budgetary and extra-budgetary funding, will play a crucial role in supporting economic growth in 2021, Yunyong said.
When it comes to on-budget financing, the EIC expects construction investment to increase 9.6% from several construction projects.
He said tax measures will be vital in limiting the impact of the third wave on private consumption.
The center expects the central bank to keep a stable policy rate of 0.5% for the remainder of 2021 in addition to buying government bonds in the secondary market if necessary to keep interest rates on. financial markets at a low level and support an economic recovery.
The increase in public debt remains manageable, although it is likely to rise above the 60% of GDP threshold next year, as government bond yields remain low, which would limit the costs of debt. interest department for the government revenue ratio, Yunyong said.