EIC cuts economy this year to 0.9%
Date 22 July 2021 time 21:13
EIC has revised down its 2021 economic forecast from 1.9% to 0.9%.
Business Economic Research Center (EIC), Siam Commercial Bank The 2021 economic forecast has been revised down from 1.9% to 0.9% as a result of the rapid and widespread expansion of the COVID-19 outbreak in the country. This will affect consumption quite a lot. Both from tighter disease control measures (lockdowns), public concerns about spending under higher uncertainty (Fear Factor) and deeper economic scarring (Scarring). Coming out is not enough and thorough. therefore only partially mitigate the effects.
Private consumption will be severely hit in the third quarter before slowly recovering at the end of the year, with the outbreak in countries in crisis. reflected from the daily number of infected people severely ill and the death toll continues to rise as well as delayed vaccination than planned As a result, the EIC expects it to take until the end of November for the number of infections to drop below 100/day. It’s been 8 months since the outbreak in April. (Previously expected to take only 4 months to control the disease) with a tendency to damage private consumption of more than 770 billion baht (about 4.8% of GDP), mainly due to the effect of lockdown measures. public concern about infection and economic uncertainty is much higher. as well as the income of entrepreneurs and workers in many business sectors that will be greatly reduced Although some businesses and consumers are increasingly turning to online transactions. This will help mitigate some of the impact. However, the impact of the prolonged outbreak will give the economic scar a chance to deepen further. both in the opening and closing of the business that has worsened More fragile labor market conditions Including the household sector will have to bear high household debt and face the condition of having high debt that will be a problem for future spending or debt overhang for a longer time. The deeper scars will be the main obstacle to economic recovery going forward.
The main driving force of the Thai economy in the second half of this year It is also the export of goods that continued to expand well. But it is facing the risk of the COVID-19 outbreak that may cause supply disruption in industrial production as a whole, despite the slowdown in global trade. but still expanding favorably following the strong recovery of the developed economies. In line with the Global PMI: Export orders index and the continued high export value of countries in the region, the EIC maintains its forecast of Thai exports at 15.0% this year, but must keep an eye on potential risks. In particular, supply disruption caused by factory closures due to outbreaks in Thailand and other countries that are in the same production chain as Thailand. Demand-side impacts from the epidemic in ASEAN economies that are key trading partners of Thailand As well as a container shortage that keeps freight rates high and a chip shortage that could affect the automotive and electronics industries.
Opening the country to foreign tourists will not be able to help revitalize tourism business much this year amid the worsening outbreak. By starting to accept tourists in pilot projects like Phuket Sandbox and Samui plus, there will be advantages in laying various infrastructure foundations to effectively support the recovery of tourism in the next phase. Both in terms of the tourist screening process, the preparation of vaccine passports and the preparation of the business sector to rehabilitate and open the business to support tourists. However, the opening of tourists may not be able to attract many tourists this year. This is because most countries that are the main source of foreign tourists in Thailand still have a policy of cautious travel to and from the country due to concerns about the outbreak of new species. coupled with the worsening epidemic situation in Thailand Also contributed to the worry of tourists traveling to Thailand, thus the EIC reduced the number of foreign tourists this year to 3 hundred thousand (previously expected 4 hundred thousand).
Adequate and effective government aid measures will be an important tool to sustain the economy and reduce economic scarring. Despite the government’s attempts to issue remedial measures in conjunction with the lockdown measures, however, the government measures that have been released to date are insufficient in terms of spatial, duration, and total money supply, namely the economic impact that has spread to every province. Nationwide, as reflected by the Facebook Movement Range, indicating a decline in travel and economic activity in all provinces. Even without being locked down As people are concerned about the infection, economic activities have been reduced. The impact period is likely to last at least during the third quarter. Therefore, the latest labor and entrepreneur compensation measures covering only one month of lockdown and compensation for provinces are not sufficient. The EIC expects that, in the case of the government base, will issue additional economic support measures from at least another 150 billion baht, including spending from the Royal Decree, borrowing about 500 billion baht. 2 hundred billion baht this year And the government may consider additional spending if the outbreak is prolonged than expected.
The measures that the government should expedite include: 1. Public health measures especially accelerating the procurement and vaccination that are effective quickly and thoroughly. Increasing access to infectious disease testing to isolate the patient from the normal person. as well as the supply of medicines Medical equipment, nursing homes and medical personnel to meet higher demands. on the issue of vaccine distribution In addition to healthcare workers and vulnerable groups, the government should allocate enough vaccines to workers in industrial clusters. to prevent the outbreak that will become a supply disruption, affecting important production chains for both exports and domestic consumption; and 2. Measures to remedy and restore the economy. In addition to the targeted, adequate, and extended treatment funds, at least during the third quarter, the outbreak is likely to remain at a high level. to help support the spending of the affected people The government should have effective measures to support liquidity and employment of the business sector, especially SMEs, in order to prevent unemployment and underperforming in the informal sector that may increase widely. Along with adjusting labor skills (Up/Re-skill) and promoting SMEs to be able to effectively adopt digital technology in both production and online platforms, which is an important condition of labor and business competition in the new normal world as well.