“Krungsri” can be confident that Soaring 3.7% tomorrow
Thailand is taking first steps on the path to recovery despite an uneven course; Krungsri Research projects Thai GDP growth at 1.2% in 2021 and 3.7% in 2022
Thai economic activity is expected to return to its pre Covid-19 level in 2H22. 2021 economic growth is now expected to reach 1.2% (against the earlier prediction of 0.6%) thanks to stronger recovery in Q4 that is forecast to reach 1.5% QoQ (compared to -1.1% in Q3) or +0.8% YoY. The economy is benefitting from the relaxation of control measures, an acceleration in the rollout of vaccinations, government stimulus spending, an improving outlook for domestic tourism, and the reopening of the country. Thus, for 1-20 November, 80,017 foreign arrivals were recorded, which will take total 2021 tourist arrivals to around 350,000, against the earlier prediction of a total of 150,000. Exports are also seeing solid rates of growth as demand strengthens in export markets and supply bottlenecks ease, and so for 2021 overall, exports are forecast to increase 16.5% (up from 15.0% in the previous forecast).
We see the Thai economy growing by 3.7% in 2022, up from our earlier prediction of 3.0%, and this should bring Thailand’s GDP level back to its pre-pandemic size during 2H22. Key drivers would be a recovery in economic activity at home and abroad. Private consumption would improve at an uneven pace with growth of 3.6% in 2022. Although the relaxation of control measures, the success of the domestic vaccination program, and government stimulus spending will help over the short term, labor markets remain weak. We expect average wage in 2022 to rise but still below pre-pandemic level. Recovery is also patchy in terms of region, income group and business sector, and so income and expenditure in harder hit sectors will remain weak, especially in services connected to the tourism sector.
For Thai export outlook, despite a slowdown, we project 2022 export growth at 5.0%, higher than average of 2.9% during 2001- 2019 (pre-pandemic), supported by the widespread success of vaccination programs and recovery in the world economy. In addition, Thailand will benefit from greater regionalization, and especially from the enforcement from 2022 of the RCEP. This will tend to boost trade, and research by the Asian Development Bank (ADB) indicates Thailand would see incremental exports of 4.9% by 2030 following gains in Japan and South Korea, and would register larger gains than other ASEAN countries. Alongside this, private investment would rise 4.6% on recovery in domestic and external demand, which will then spur a new investment cycle as businesses respond to the ‘new normal’ and accelerating digitalization. Net inflows of foreign direct investment (FDI) for 1H21 increased and above the level for the whole of 2019. Pushing ahead with government infrastructure spending will help to pull in greater private investment, with most projects organized as public-private partnerships (over 80% of infrastructure investment during 2022-2026 are PPPs). For the tourism sector, there are signs of nascent recovery. Although Thailand reopened to quarantine-free travel from over 60 countries in November, the recovery could be disrupted by continuing uncertainty over the spread of Covid-19 and travel restrictions in many of Thailand’s major tourism markets. Given this, we see foreign arrivals totaling 7.5m in 2022 and we do not expect the sector to return to its pre-Covid-19 total of 40m arrivals until 2025. Domestic tourism will recover ahead of this, and following an expected 90m domestic trips in 2022, the industry is forecast to record 160m domestic trips (equal to its pre-pandemic level) in 2024.
