Thailand
Thailand Q4 GDP to contract 0.8%, Covid-19 remains key threat: UOB
THAILAND’S gross domestic product (GDP) for the fourth quarter of 2021 is likely to contract 0.8 per cent year on year amid continued Covid-19 infections and the slow growth of tourism arrivals, UOB said in a report released on Thursday (Jan 27).
Should the projection come to pass when Thailand announces its Q4 GDP data on Feb 21, the country’s full-year economic growth will average 0.7 per cent, lower than central bank Bank of Thailand’s (BOT) 2021 GDP growth outlook of 0.9 per cent and following the Q3 0.3 per cent year-on-year contraction, economist Barnabas Gan added.
Gan expects Covid-19 to remain a key threat to Thailand’s growth prognosis, as the rate of infections has recently picked up to above 1 since the start of the year, to as high as 1.92, despite the nationwide vaccination rate increasing gradually.
He remains cautious of Thailand’s growth momentum for the year ahead due to renewed drags on consumption, investment and tourism levels, and keeps the GDP growth outlook of 3.5 per cent for 2022.
The country’s policy makers said targeted fiscal policies are necessary to drive economic growth in 2022 and finance minister Arkhom Termpittayapaisith had previously commented that Covid-19 relief measures are short-term and may be unwound when economic conditions improve, Gan highlighted.
Tourism arrivals need to pick up for further economic recovery, Gan said. Although the gradual reopening of Thailand’s borders and the Sandbox programme to waive mandatory quarantine for immunised travellers have resulted in arrivals rising 2,877.3 per cent in November 2021, inbound tourism has slowed to an uptick of 17.4 per cent year on year in December 2021.
The economist believes that BOT is likely to stay accommodative despite higher global interest rates, due to economic downsides given the subdued tourism recovery and weak domestic investor demand.
“Nonetheless, while we expect BOT to inject a token 25 basis point rate hike in 2022, we are shifting the schedule forward to Q3 from Q4 in response to the faster-than anticipated US Federal Open Market Committee rate hike for the year ahead,” the economist said.
Meanwhile, the decline of Thailand’s foreign reserves to US$244.3 billion in the week of Jan 7 has resulted in the import cover falling to 9.7 months at latest reading, although reserves are still at “healthy levels”, Gan observed.
As for inflation, the economist said that its risks “remain largely immaterial at this juncture” despite Thailand’s headline consumer price inflation decelerating to 2.17 per cent year on year in Dec 2021, as the country’s consumer prices rose only 1.2 per cent for the whole of 2021.
Source: https://www.businesstimes.com.sg/asean-business/thailand-q4-gdp-to-contract-08-covid-19-remains-key-threat-uob