Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Thailand had considerable success in containing its domestic
COVID-19 pandemic during 2020 and the first quarter of 2021.
However, the situation has deteriorated since April 2021, with an
escalating COVID-19 wave driven by the more highly transmissible
Delta variant that has resulted in a rising death toll. The
international tourism sector, which was a major growth driver prior
to pandemic, has been in a protracted and deep slump since April
2020, with hopes for any significant near-term tourism sector
recovery fading.
Thailand's economy hit by COVID-19 Delta
wave
The Thai economy was in severe recession in 2020, with a GDP
contraction of 6.2% year on year (y/y). This reflected the impact
of the COVID-19 pandemic on domestic economic activity as domestic
lockdown measures were put in place, as well as the impact of
global lockdowns on international merchandise trade. A particular
severe negative shock for the Thai economy has been from the
effects of global travel bans on international tourism travel.
Some recovery in economic momentum was evident during the first
half of 2021 (H1 2021), with GDP growth of 2.0% y/y. Base year
effects contributed to the rapid growth rate of 7.5% y/y recorded
in Q2 2021, although compared to Q1 2021, quarter-on-quarter growth
was a modest 0.4%.
Private consumption rose by 4.6% y/y in Q2 2021, and by 2.1% y/y
in H1 2021. Private investment rose by 9.2% y/y in Q2 2021 and by
5.9% y/y in H1 2021.
Exports of goods performed strongly in Q2 2021, rising by 30.7%
y/y, with H1 2021 exports of goods up by 15.7% y/y. In July,
merchandise exports were up 20.3% y/y. However, services exports
have been experiencing deep and protracted recessionary conditions
due to the collapse in international tourism. In 2020, exports of
services contracted by 60% y/y, with a further 47% y/y decline
recorded in H1 2021.
Manufacturing output rose strongly in Q2 2021, up by 16.8% y/y,
with expansion of 8.2% y/y in H1 2021.
However, despite the improving momentum of GDP growth in Q2
2021, the onset of a severe new COVID-19 Delta wave since late June
2021 has darkened the near-term economic outlook. This resulted in
the Thai government introducing stricter lockdown measures in
Bangkok and nine provinces from 12th July, with further extensions
of these restrictions during August.
Low COVID-19 vaccination rates have contributed to Thailand's
vulnerability to the latest pandemic wave. However, the Thai
government has ramped up its vaccination program in recent weeks,
with an estimated 39% of the total population having received their
first dose vaccinations by mid-September. Although there has been
some decline in daily new COVID-19 cases reported in Thailand
during the first half of September, the level of daily new cases
still remained high by mid-September 2021.
Although some easing of restrictions on the retail sector have
been introduced since 1st September, the overall impact of the
recent pandemic wave and the subsequent restrictive measures is
expected to be a significant drag on GDP growth momentum in Q3
2021.
Thailand's manufacturing sector shrank for a fourth straight
month and at a faster rate in August, according to the latest IHS
Markit PMI data. The
IHS Markit Thailand Manufacturing PMI eased to 48.3 in August
from 48.7 in July, remaining below the 50.0 no-change mark for the
fourth straight month to signal a deterioration in the health of
the Thai manufacturing sector.
New orders and production both fell for a fourth consecutive
month and at a faster pace compared to July. Companies mostly cited
the escalating COVID-19 pandemic driving the deterioration of
economic conditions.
Overall sentiment remained weak as manufacturers grew more
pessimistic on the 12-month outlook for production in August,
particularly given the COVID-19 related disruptions. The impact of
supply chain disruptions due to the COVID-19 wave was reflected in
the decision by Toyota Motor to temporarily close three of its
factories in Thailand during July.
Thailand's tourism sector remains in deep
slump
By 2019, direct tourism spending accounted for an estimated 12%
of Thai GDP, with Chinese tourism having played an increasingly
important role in underpinning the Thai tourism economy. Thailand
has been one of the most notable beneficiaries of the boom in
Chinese tourism over the past decade, with total annual Chinese
tourist visits to Thailand having risen from 2.7 million in 2012 to
11 million in 2019. Chinese tourism spending in Thailand was
estimated to have reached USD 18 billion in 2019, amounting to more
than 25% of total international tourism spending in Thailand.
In 2019, Thailand had 39.8 million foreign tourist arrivals.
Although international tourism continued to be permitted during the
first quarter of 2020, tourism visitors were banned from April 2020
onwards. Consequently, total international tourism visits for
calendar year 2020 fell to 6.7 million arrivals, almost entirely
comprising tourism arrivals during the first quarter of 2020.
The international tourism sector has remained in dire straits
during 2021 to date. In the first half of 2021, total international
tourism visitor numbers were just 40,500 compared with 6.7 million
visits in the first half of 2020, when international tourism had
already shut down during the second quarter of 2020.
Due to the escalating domestic pandemic, domestic Thai tourism
was also hit during the first half of 2021, with total domestic
tourism trips down 15% y/y while domestic tourism revenue fell by
38.5% y/y.
Although a pilot scheme for vaccinated international tourists
was introduced for Phuket from 1st July 2021, tourist arrivals have
been low. This likely reflects a number of factors, including the
escalating COVID-19 wave in Thailand during July and August, as
well as considerations such as quarantine requirements in home
countries for travellers returning from Thailand.
With the whole of Southeast Asia still suffering from a severe
escalation in COVID-19 cases, prospects for any near-term recovery
in international tourism in Thailand remain low, at least for the
remainder of 2021.
Economic outlook
The Thai economy continues to face severe economic challenges in
H2 2021 despite the rebound of manufacturing output and strong
exports of goods. Continuing economic shockwaves to the economy
have come from the collapse of international tourism, given the key
role it plays as an important pillar of the Thai economy.
Furthermore, the latest COVID-19 Delta wave has further dampened
economic growth momentum due to weakening domestic demand. These
factors are expected to significantly restrict the pace of GDP
growth in 2021, to just 0.8% y/y.
At present, the most likely pathway out of the protracted
collapse in Thailand's international tourism sector and its wider
repercussions to other sectors such as retailing and transportation
will be the continuing rollout COVID-19 vaccine programs in
Thailand as well as key tourism markets. Meanwhile the economic
costs to Thailand's tourism industry and tourism sector jobs will
remain severe, acting as a major drag on the economy.
The rapid ramp-up of Thailand's COVID-19 vaccination program
during H2 2021 is expected to help to contain the severity of the
pandemic, allowing domestic economic activity to improve during the
next six months. Furthermore, a gradual reopening of international
tourism in Thailand over the next 12 months is expected to be an
important factor supporting economic recovery, with GDP growth
projected to strengthen to around 4% in calendar year 2022.
Rajiv Biswas, Asia Pacific Chief Economist, IHS
Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.