THAILAND’S economy did not do as badly as expected in the second quarter, and the worst is likely to be over — though much weakness still lies ahead, said economists after official Q2 figures were released on Aug 17.

Gross domestic product (GDP) fell 12.2 per cent year on year in Q2, slightly better than the consensus expectation of a 13 per cent fall but marking the third straight quarter of contraction, and the sharpest decline since the Asian Financial Crisis.

On seasonally adjusted quarterly basis, GDP was down 9.7 per cent, deepening from the first quarter’s 2 per cent fall. But with Covid-19 largely contained, the worst is likely over, said Citi economist Nalin Chutchotitham.

The relatively short lockdown, from late March till early May, may have helped to prevent a larger contraction, she added.

But recovery is still likely to remain gradual, given delayed reopening of borders to international tourists, and the potential impact of rising unemployment and bad debts.

“While 2Q marked the nadir of the downcycle, with smaller decline in 2H, a sustained rebound might be elusive unless global recovery gets underway and travel restrictions are eased,” said DBS economist Radhika Rao.

“On trade, signs are encouraging as China, South Korea and Singapore’s exports show signs of bottoming out, led by pharma and electronics shipments,” she added. But the outlook for tourism is cloudier, with plans of ‘travel bubbles’ with other countries still in discussion, she said.

With Thailand’s economy being highly dependent on trade and tourism, UOB economist Barnabas Gan downgraded his outlook for the country’s full-year growth to -7.5 per cent, down from -5.4 per cent previously.

In contrast, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye raised their estimate for Thailand’s full-year growth to -6.7 per cent, up from -7.3 per cent previously, on the back of Q2’s better-than-expected figure.

They also raised their growth forecast for 2021 to 5 per cent, up from 4.5 per cent, noting that Thailand will benefit not just from global economic recovery but also foreign direct investment, as supply chains shift away from China.

Still, risks remain, they added. Unemployment nearly doubled from its usual rate in the second quarter, and cash handouts to informal workers, farmers and welfare card holders ended in July.

Borders may also stay closed to overseas tourists for the rest of the year, and social unrest is rising as anti-government protesters take to the streets.