Thai group cuts 2021 GDP outlook on Covid resurgence

Bangkok

THAILAND'S joint business group on Wednesday lowered its growth forecast to 1.5 to 3.5 per cent this year, from the 2 to 4 per cent projection last month, saying the country's new coronavirus outbreak, its most severe yet, will hamper an economic recovery.

The downgrade is based on an assumption that the new epidemic is controlled within three months and the government accelerates some 200 billion baht (S$8.8 billion) of support measures, Kalin Sarasin, chairman of the joint business group on commerce, industry and banking, told a briefing.

"Over the next two to three months, the outbreak will impact consumer confidence, tourism and investment," he said.

A new cluster of cases in December linked to migrant workers and a gambling den has led to infections in over half of Thailand's provinces.

The Bank of Thailand has also warned of risks from the outbreak impact while analysts say new virus restrictions could detail the country's nascent recovery.

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At the central bank's last meeting in December, it cut its 2021 GDP growth forecast to 3.2 per cent from 3.6 per cent, while predicting a 6.6 per cent contraction for 2020.

While the impact on employment remains unclear, many workers could lose their jobs, Supant Mongkolsuthree, chairman of The Federation of Thai Industries, told the briefing.

The group also cut its export growth outlook to 3 to 5 per cent, from 4 to 6 per cent, due to a slow global economic recovery, a container shortage and a persistently strong baht, which has gained 10.8 per cent since April last year.

"Exports may not grow in the first quarter," Mr Supant said, adding shipments should improve later when vaccines were available and global consumption increased.

For 2020, the group forecast the economy contracted 6 to 7 per cent, the deepest fall in over 20 years. Official fourth-quarter and 2020 gross domestic product data will be released in February.

According to minutes of the central bank's last policy meeting, Thailand's economic outlook will be substantially affected by a surge in Covid-19 cases.

On Dec 23, the central bank's monetary policy committee left the one-day repurchase rate at a record low of 0.50 per cent for a fifth straight meeting after three cuts earlier in 2020 to support the economy.

The central bank saw a need to preserve limited policy room to use at the most effective time, as the situation related to a new wave of coronavirus infections remained highly uncertain, the minutes said.

"Thailand's economic projection would be substantially affected in the case of a surge in new infections," the minutes warned.

"The committee thus saw a need to closely monitor development and assess the adequacy of government measures".

The committee was also concerned that a rapid rise of the baht could affect a fragile recovery, the minutes said.

A new foreign exchange ecosystem should be expedited to address structural problems in the currency market and encourage more balanced capital flows, they said.

The new ecosystem would allow Thais to invest abroad more easily and in larger amounts, increase flexibility in foreign exchange risk management for entrepreneurs, and promote competition among foreign exchange service providers, the minutes added. REUTERS