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Thailand: World Bank sees return to prior growth by 2022
The World Bank flagged a warning that 8.3 million workers in Thailand could lose jobs or income from the coronavirus pandemic, but the Thai economy is estimated to bounce back to pre-pandemic level in the next two years as the country eases its coronavirus lockdown.
The coronavirus crisis has put many jobs, in particularly those related to tourism and services, at risk, said Birgit Hansl, country manager for Thailand at the World Bank.
The outbreak will likely lead to severe job losses, particularly in tourism, due to transmission control and social distancing measures.
The impact on household welfare is also likely to be severe.
“As the recovery phase begins, a key challenge will be how to help people who lost their jobs reconnect with the labour market,” Ms Hansl said. “Active labour market measures, such as wage subsidies targeted at individuals in the most vulnerable sectors, and for on-the-job training to promote re-employment, should be explored.”
The number of economically insecure, such as those living below US$5.5 a day, is projected to double from 4.7 million in the first quarter this year to an estimated 9.7 million in the April-to-June quarter before recovering slightly to 7.8 million in the third quarter, she said.
With officials starting to loosen mobility restrictions, domestic consumption, Thailand’s traditionally strongest driver of growth, may pick up in the second half of 2020 and in 2021, but the economic recovery will be gradual and uncertain, Ms Hansl said.
As a baseline, GDP is projected to grow by 4.1% in 2021 and by 3.6% in 2022, which represents a slow recovery to pre-pandemic GDP output levels by mid-2022.
“The shape of the recovery is subject to considerable downside risks, including weaker global growth, feeble tourism, and continuing trade and supply chain disruptions,” Ms Hansl said.
The Thai economy is predicted to shrink by at least 5% this year, the deepest decline in the East Asia and Pacific region, due to the country’s reliance on trade and tourism, she said.
The Bank of Thailand last week lowered its economic outlook to a contraction of 8.1% this year, worse than the record contraction of 7.6% during the 1997 financial crisis.
Weaker global demand has led to a contraction in global trade, which in turn has hit exports and disrupted global value chains such as for automobiles, in which Thailand is an active participant. The tourism sector, which accounts for close to 15% of GDP, has been severely impacted with a near cessation of international tourist arrivals since March, Ms Hansl said.
Exports are expected to decline by 6.3% in 2020, the sharpest quarterly contraction in five years, as demand for Thai goods remains weakened by the global slowdown.
Household consumption is projected to decline by 3.2% as movement restrictions and dwindling incomes limit consumer spending, especially in the second quarter.
Thailand’s combined virus response packages amount to 12.9% of GDP, focused on providing relief to vulnerable households and affected firms. The programmes are unprecedented for Thailand in terms of size, coverage and variety of instruments.
Thailand will also need to invest in labour market policies and programs that can meet the changing needs of the economy, according to the World Bank. Training and employment services programmes need to be reformed to reflect shifting demand in the labour market, towards more socio-emotional skills as well as higher-order cognitive and technical skills.
In the longer term, policies to support resiliency will be critical, Ms Hansl said, adding that as fiscal space decreases, the rebuilding of fiscal buffers, particularly through enhanced revenue mobilisation, will be critical to allow Thailand to respond to future shocks, as well as implement planned public infrastructure investments.
Source: https://www.bangkokpost.com/business/1943760/world-bank-sees-return-to-prior-growth-by-2022