Covid-19 curbs erode Thailand's recovery gains; reopening may mean rebound: economists

COVID-19 restrictions have undone almost all of Thailand's recovery since May 2020, Barclays economists Shreya Sodhani and Brian Tan said in a report on Tuesday, following the Bank of Thailand's report on economic and monetary conditions in July.

But with the number of cases likely to have peaked, restrictions are set to be eased in September and pent-up demand will likely boost activity in September and October, they added.

In a separate note, Maybank Kim Eng economists Lee Ju Ye and Chua Hak Bin maintained their full-year growth forecasts for Thailand at 1.4 per cent for this year and 4 per cent in 2022.

They noted that consumer confidence slumped to a record low of 40.9 in July, from 43.1 in June. Private consumption was down 8.1 per cent from a year ago, the steepest fall since May 2020.

But they also observed that the pandemic has peaked and Thailand is shifting to a strategy of living with endemic Covid-19.

The key tourism industry saw the start of its Phuket "sandbox" on July 1, with the country receiving 18,056 foreign arrivals that month. Still, that level of arrivals will not move the needle for its tourism industry, noted the Barclays economists.

The Maybank economists note that as at Aug 27, Phuket had recorded 25,000 arrivals under the sandbox, including 14,000 in July - still far below pre-pandemic levels of 3.3 million a month.

"The Phuket sandbox is under increasing threat as local infections on the island spiked to 200 cases a day," they added.

Hotels have had an influx of cancellations from the United Kingdom, which is among the top markets for the sandbox, with the UK having moved Thailand to its red list from Aug 30, meaning that arrivals from Thailand must undergo a self-paid quarantine.

Manufacturing production fell to the lowest level in a year, down 5.1 per cent on a monthly seasonally-adjusted basis, though up 5.1 per cent year on year due to base effects.

Production of automotives, petroleum and construction materials slowed due to weaker demand and disruptions to supply. While manufacturing was supported by exports, global shortages of shipping containers and semiconductors affected production.

The private investment index was up 11.6 per cent from a year ago, but down 3.8 per cent on a monthly seasonally-adjusted basis, in the largest fall since May 2020.

However, this was due mainly to a decline in construction materials because of stricter Covid-19 curbs at construction sites, noted the Maybank economists. Imports of capital goods and domestic machinery sales both remained resilient, up 24.9 per cent and 25.3 per cent respectively.