Thailand's second Covid-19 wave eases political tensions, while threatening a fragile recovery

AFTER successfully containing the Covid-19 pandemic in the first half of 2020, Thailand is now facing a new surge linked to illegal migrant workers and gambling dens. This could bring an already fragile economic recovery under some threat, according to Citi analysts. Separately, Nomura analysts have noted a temporary easing of political tensions, due partly to the virus's resurgence.

In a Jan 5 note, Citi economist Nalin Chutchotitham said new cases do not appear to have peaked. She noted that as at Dec 20, Thailand had recorded fewer than 4,400 cases in total. This figure had more than doubled to 8,966 by Jan 5, involving 56 out of 77 provinces.

The new wave is linked to last month's outbreak in a seafood market in Samut Sakhon, a province near Bangkok. Subsequently, the authorities actively tested thousands of migrant workers - a significant number of which were found to have entered Thailand illegally from Myanmar, evading state quarantine measures. Of the 527 new cases recorded on Jan 5, 439 were migrant workers.

Another cluster sprang from a gambling den in Rayong, which has given rise to 426 confirmed cases as at Jan 5.

With effect from Jan 4, Thailand's Centre for Covid-19 Situation Administration has designated 28 of Thailand's 77 provinces, including Bangkok - mainly in the central, eastern and western regions - as high-risk "red zones". Mass gatherings in these provinces are prohibited, and areas such as pubs, schools and fitness gyms are to be shuttered until at least Jan 15. Unlike the lockdown in March 2020, however, restaurant dine-ins may continue until 9pm, and malls and markets will remain open.

Despite the second wave, Ms Nalin said in her note that the impact of the surge on Thailand's gross domestic product (GDP) could be smaller than the effects of the lockdown in H1 2020, where domestic and external demand affected tourism, exports and investment.

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"There remains ample room for fiscal support on domestic consumption, but possibly over the next few months after new infections are down to double digits, in our view," wrote Ms Nalin. "Vaccines could be key to rejuvenating international tourism in H2. We keep our 2021 GDP growth forecast at 4.5 per cent (with some downside risk) and expect no change in (Bank of Thailand's) policy rate in 2021."

Separately, analysts Charnon Boonnuch and Euben Paracuelles from Nomura noted that the recent Covid-19 wave likely prompted a pause in street protests, and a temporary easing of political tensions.

A poll conducted from Dec 24 to 25 by the National Institute of Development Administration found that 41.6 per cent of respondents expected Thailand's political situation in 2021 to be unchanged from 2020, a slight increase from the previous survey, conducted from Dec 3 to 4 (40.4 per cent).

Some 35.5 per cent of respondents expected more disruptions. While significant, this marked a decline from 45.0 per cent in the previous survey.

"The survey results are consistent with our view of a prolonged political conflict," wrote the analysts in their note. "Protests are likely to resume as demands of protesters have not yet been met and economic conditions are weak.

They added: "We maintain our forecast for GDP growth to rise to 3.2 per cent in 2021 (Consensus: 4.2 per cent) from -6.9 per cent in 2020 (Consensus: -6.5 per cent), but downside risks could rise from the new Covid-19 wave and social distancing measures. We still pencil in 50 basis points of policy rate cuts by the Bank of Thailand in Q1."