• Southeast Asia’s second-largest economy shrank 12.2 per cent in April-June from a year earlier, the biggest drop since 1998
• The coronavirus pandemic has hit trade, tourism and exports, but the Thai government plans to add more stimulus measures this month

Thailand’s economy saw its biggest annual contraction in 22 years and a record quarterly fall in the April-June period, as the coronavirus pandemic and restriction measures hit tourism, exports and domestic activity, prompting an outlook downgrade.

Southeast Asia’s second-largest economy, which is heavily reliant on tourism and exports, shrank 12.2 per cent in the second quarter from a year earlier, the worst contraction since the Asian financial crisis in 1998, data from the state planning agency showed on Monday.

But that was better than a 13.3 per cent slump seen in a Reuters poll, and compared with a downwardly revised 2.0 per cent fall in the March quarter.

On a quarterly basis, the economy shrank a seasonally adjusted 9.7 per cent, the deepest on record, but better than the 11.4 per cent drop forecast by economists.

The National Economic and Social Development Council (NESDC) cut its gross domestic product forecast for 2020. It now expects Thailand’s economy to shrink by 7.3 -7.8 per cent this year, having previously forecast a 5-6 per cent contraction.

“Today’s economic release underscores the collapse of aggregate demand, both externally and internally,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank. “Recovery will be lengthy as the shock to the demand and supply side has been the most severe in living memory.”

While Thailand has lifted most lockdown restrictions after seeing no local transmission of the coronavirus for over two months, its economy continues to suffer from an ongoing ban on incoming passenger flights and from tepid global demand.

The number of foreign visitors fell to zero in April-June, and Thailand has also shelved travel bubble plans amid new virus waves. The planning agency expects only 6.7 million foreign tourists to come to Thailand this year, down 83 per cent from last year’s record 39.8 million.

The impact of the lockdown and the travel ban will continue to affect domestic consumption and investment, with anti-government protests adding to the risks, while exports will remain weak due to soft global demand, analysts say.

At least 10,000 people on Sunday joined the biggest protest in Thailand since the 2014 coup, to demand that the government step down and bring a new constitution for fresh elections. Some protesters are also pushing for reforms to the monarchy – until recently a taboo subject.

The state planning agency also cut its forecast for exports this year, expecting them to fall 10 per cent in 2020 versus a previous forecast for an 8 per cent decline.

The downturn comes despite government efforts to support the economy with a 1.9 trillion baht (US$61.03 billion) fiscal stimulus package, while the central bank has also slashed interest rates by 75 basis points so far this year to a record low of 0.50 per cent.

Thailand plans to introduce more stimulus measures later this month, a new deputy prime minister said on Monday.

The measures will help all groups hit by the crisis, Supattanapong Punmeechaow told a briefing after a meeting with new Finance Minister Predee Daochai and officials. Supattanapong is also energy minister and will oversee the government’s economic agencies.

Source: SCMP.