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Thailand’s economy – Southeast Asia’s second-largest – is back on the recovery track, thanks to increased exports and tourism. Rebounding more quickly than expected, Thailand’s Gross Domestic Product (GDP) increased by 1.6 % in 2021, official data by the National Economic and Social Development Council (NESDC) showed. The recovery started mid-2021, with a GDP growth of 1.9% in the last quarter, year over year.
According to NESDC chief Danucha Pichayanan, the main driver for further economic recovery will be “exports and fiscal disbursement, with tourism and domestic consumption adding to the support.”
Thailand’s exports climbed 21.3% y-o-y in the December quarter. The country registered a full-year growth of 17.1% for 2021, the highest in 11 years.
Meanwhile, Thailand’s tourism sector – which normally accounts for around 12% of Thai GDP – also recovered in Q4 as the nation eased coronavirus curbs and reopened borders to foreign visitors. There were about 340,000 foreign tourists who came to Thailand in the fourth quarter of 2021, up from 45,000 in the previous three months.
Imbalanced growth in 2021
Despite the fact that the economy improved in Q4, uncertainties remain high for 2022. Compared to a 6.1% drop in 2020 – the country’s worst economic performance since the 1997 Asian Economic Crisis – the 2021 full year growth rebounded to positive territory. However, it is still below pre-pandemic levels of 2.4% in 2019 and 4.2% in 2018. The 2021 GDP growth was also one of Southeast Asia’s slowest.
Lead Economist Sian Fenner at Oxford Economics said the domestic recovery was uneven, with household spending and government consumption picking up, but investment remains weak.
Thailand’s private consumption rose 3.6% quarterly (0.3% y-o-y) in Q4, but total investment fell 1.7% quarterly (-0.2% y-o-y), with both public and private construction remaining very weak.
Meanwhile, the spread of the Omicron coronavirus continues to put a strain on the tourism industry, despite higher vaccination rates and the progressive easing of global travel restrictions. The sector’s recent data remains significantly below the 40 million foreign visitor arrivals in 2019.
However, the government has just updated entry requirements, making it easier to enter Thailand, beginning March 1. The so-called “Test and Go” programme was revised and now allows travellers to enter with a reduced minimum coverage for medical insurance and just 1 PCR test on arrival. This move is expected to revive the tourism sector further.
Economy in 2022: Recovery continues to be uncertain
While the Thailand economy is improving, there are still headwinds in 2022.
One factor possibly putting the brakes on recovery is the rising inflationary threats, with January inflation jumping to a nine-month high of 3.23%. The Bank of Thailand (BOT) has forecasted the headline inflation rate to rise beyond the target range of 1-3% in early 2022 before declining in the second half of the year.
NESDC kept its GDP forecast for 2022 at 3.5% to 4.5% and predicted export growth at 4.9% in 2022, led by stronger domestic demand, rising export and tourism, governmental investment support, as well as a reduced impact from the Omicron-driven coronavirus outbreak. Meanwhile, the BOT downgraded its 2022 full-year visitor arrival estimates to 5.6mn (from 6.0mn) in December.
Kirida Bhaopichitr, research director for the International Research & Advisory Service, Thailand Development Research Institute (TDRI) – expects the country’s GDP growth to reach its former 2019 level in 2023.
As per the TDRI insight, businesses related to tourism will take another two to three years to recover to their pre-pandemic levels, which “will continue to adversely affect small and medium-sized businesses as well as over 400,000 workers in the tourism-related sector.”
On the other hand, several industries are expected to continue to grow. “These include exports and digital business and their supply chains. Notable examples are automobiles and parts, food products, e-commerce, delivery and packaging services, logistics and warehouses, IT solutions, cybersecurity services, telemedicine, hard disk drives, cloud data centres, and digital asset platforms,” said Bhaopichitr.
