Thai economy slips into recession after worst quarter in eight years

[webfact]

Thai economy slips into recession after worst quarter in eight years

By Orathai Sriring and Kitiphong Thaichareon

 

FILE PHOTO: A man sleeps on an almost empty beach, which is usually crowed with tourists, following the coronavirus disease (COVID-19) outbreak in Pattaya, Thailand April 26, 2020. REUTERS/Soe Zeya Tun/File Photo

 

BANGKOK (Reuters) - Thailand's economy contracted at its sharpest pace in eight years in the first quarter, pushing Southeast Asia's second largest economy into recession sooner than expected, as the coronavirius pandemic hit tourism and domestic activity.

 

The state planning agency, reporting January-March data on Monday, slashed its forecast for 2020 gross domestic product (GDP) to a contraction of 5.0-6.0% from growth of 1.5%-2.5% projected in February.

 

That would be the worst decline since 1998 when the Asian financial crisis damaged the economy.

 

The economy shrank 1.8% in the first quarter from a year earlier, the deepest contraction since the fourth quarter of 2011, when there was bad flooding.

 

That was better than a 4.0% contraction seen in a Reuters poll, and compared with downwardly revised 1.5% growth in the final quarter of 2019.

 

"The outbreak impact in Q2 will be much bigger than in Q1," said Phacharaphot Nugtramas, economist at Krung Thai Bank, who predicts the economy will shrink 8.8% this year.

 

The impact of lockdowns, while having eased somewhat, will continue to affect household spending and private investment for the rest of the year, he added.

 

On a quarterly basis, the economy shrank a seasonally adjusted 2.2%, also the worst decline since 2011, but less than the poll's 4.5% decline.

 

The agency revised October-December's quarterly GDP to a 0.2 contraction from 0.2% growth, meaning the economy slipped into a technical recession.

 

WORSE YET TO COME

The economy will be hit the hardest in the second quarter by lockdowns, Thosaporn Sirisumphand, head of National Economic and Social Development Council (NESDC), told a news briefing.

 

"There should be a U-shaped recovery," he said, adding foreign tourists may be allowed to return in the third or fourth quarter.

 

Thailand on Sunday opened malls and department stores for the first time since March in its second phase of relaxing measures as the number of new coronavirus cases slowed.

 

The government has extended a ban on passenger flights until end-June to try to curb the spread, which has infected more than 4 million globally and 3,031 people in the country.

 

The agency cut its projection for this year's exports and foreign tourist numbers, the main drivers of Thai growth.

 

It now expects exports to fall 8% this year, rather than rise 1.4%, and slashed its forecast for foreign tourist numbers this year to 12.7 million, down from 37 million seen earlier, and last year's record 39.8 million.

 

However, the government's 1 trillion baht ($31.22 billion) borrowing will help, Thosaporn said, referring to the latest step to mitigate the outbreak impact.

 

Most economists expect the central bank to cut its key interest rate further from a record low of 0.75% this week.

 

"With the outlook for near term growth and the recovery very poor, the Bank of Thailand is set to ease policy further on Wednesday. We have pencilled in a 25 bps cut, to a record low 0.5%," Capital Economics said in a note.

 

"Overall, we think the economy will shrink by 9% this year, which would be worse than even during the Asian financial crisis."

 

In the first quarter, foreign tourist numbers tumbled 38% from a year earlier, while private investment fell 5.5% and public investment dropped 9.3%. Private consumption rose at a slower pace of 3%.

 

(Additional reporting by Satawasin Staporncharnchai; Editing by Jacqueline Wong)

 

-- © Copyright Reuters 2020-05-18

 

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[scubascuba3]

No surprise if you sacrifice the economy

[Ranshoko]

To be expected. Most other countries will end up the same. However, I suspect the Bankers and Government will manipulate the Baht and keep it strong. 

[worgeordie]

The bad news for Thailand,has not affected the Baht at all,

what's it going to take !

regards Worgeordie

[DrTuner]

So, when is BoT going to do QE? Machine says brrrrrrrr....

[eddibabyyeah]

I thought there had to be two successive quarters of negative growth to be classed as a recession. There clearly will be in three months, when the figures are announced. But not now.  

[MadMuhammad]

Well duh! I’m getting bored with the word RECESSION printed in capitals and it being thrown around like it’s a shock it’s happening or something ????

[baansgr]

Any country so heavily reliant on tourism is going to the wall quickly and for a long time. Thailand food wise can be self sufficient unlike other countries. For once I'm pleased the UK is based on services which won't be affected as badly as manufacturing...

[spiekerjozef]

Let's wait what TAT has to say about this.

[sammieuk1]

Nothing like a good worst quarter in 8 years story to strengthen the bulletproof baht ????

[hugolars]

57 minutes ago, Ranshoko said:

To be expected. Most other countries will end up the same. However, I suspect the Bankers and Government will manipulate the Baht and keep it strong. 

Yes, the elite does not want their trillions to loose its value.
I wonder if there is financial mechanism to detect currency manipulation or if its unofficially pegged to other currency.  

[tribalfusion001]

China was -9.8% for Q1, Germany -4.4%, UK -2.0%, if all depends on how well the economy can rebound. Countries like Thailand with 20%+ in GDP with tourism are going to struggle, the same applies to Spain.

 

The EU countries that have large amount of tourism will probably bounce back quicker with Europeans taking domestic and foreign countries within the EU, I'm sure the UK can come to an arrangement for a corridor too.

[Brunolem]

7 minutes ago, MadMuhammad said:

Well duh! I’m getting bored with the word RECESSION printed in capitals and it being thrown around like it’s a shock it’s happening or something ????

Yes capitals letters should be used only for DEPRESSION, which is what is coming, and not only for Thailand.

 

I haven't seen anything about a one trillion baht borrowing...last week they started selling bonds for up to 50 billion baht, but that's a long way from a trillion, unless they plan to borrow the balance on foreign markets.

 

No U shaped recovery, unless the bottom of the U is as long as a bath tub.

 

The effects of the recession/depression have yet to be felt...until now many families have gone on thanks to the 5,000 baht scheme and their savings, but this is not going to last long.

 

By July, a lot misery is going to start settling everywhere, especially in cities...

 

A long 2020...that will only be the first year of a long decade...

 

[Zikomat]

The next quarters will DEFINITELY be much worse. One doesn’t need a degree in science to understand it.

 

 

Edited May 18, 2020 by Zikomat

[realfunster]

1 hour ago, webfact said:

The agency revised October-December's quarterly GDP to a 0.2 contraction from 0.2% growth, meaning the economy slipped into a technical recession.

 

This is what caught my eye - a 0.4% negative adjustment on previously reported Q4'19 GDP. 

What on earth is going on there ?

 

They wouldn't have been massaging previous economic figures and now see the chance to file this Q4'19 performance under the 'unavoidable coronavirus recession', would they ?

 

The rest is no great surprise, going to be a big hit to the Thai economy. Particularly exports and tourism.

 

Globally, Q2 has seen much bigger disruption due to coronavirus, the economic impacts will be significantly worse than Q1. 

 

However, Thailand, being relatively unaffected by coronavirus, should at least get the domestic economy and consumption back towards normality ASAP and limit the damage as much as possible. I believe the current approach is far too conservative and removal/relaxation of restrictions should be accelerated.

 

[realfunster]

1 hour ago, eddibabyyeah said:

I thought there had to be two successive quarters of negative growth to be classed as a recession. There clearly will be in three months, when the figures are announced. But not now.  

 

Refer to my other post, they have 'restated' Q4'19 to be -0.2% growth, so we now have our 2 consecutive quarters of negative growth.

[Brunolem]

22 minutes ago, realfunster said:

I believe the current approach is far too conservative and removal/relaxation of restrictions should be accelerated.

 

Agree!

[toenail]

Every country is facing a recession or...depression. Sad times. 

[Ian Nagle]

2 hours ago, DrTuner said:

So, when is BoT going to do QE? Machine says brrrrrrrr....

IMF said no. 

[connda]

Just lock the plebs down again claiming "The Second Wave" has hit.  There's still plenty of space beneath the economy for further economic destruction.  It's doesn't effect the ones making the dictates.  They're having a grand old time pulling the strings and watching the puppets dance.

[Soikhaonoiken]

7 hours ago, OneMoreFarang said:

 

 

 

3 hours ago, worgeordie said:

The bad news for Thailand,has not affected the Baht at all,

what's it going to take !

regards Worgeordie

That's why it's called Teflon Thailand.. ????

[cornishcarlos]

3 hours ago, Zikomat said:

The next quarters will DEFINITELY be much worse. One doesn’t need a degree in science to understand it.

 

 

 

Or a degree in economics !!

[Malawi]

Does anything actually affect the value of the Baht?

Unbelievable.

[realfunster]

8 hours ago, worgeordie said:

The bad news for Thailand,has not affected the Baht at all,

what's it going to take !

regards Worgeordie

Why would it ? Everyone else is even more f-ed.

A bit like the GFC2009, Asia is going to come out of this much quicker and less economically damaged than the west. 

[tribalfusion001]

23 minutes ago, realfunster said:

Why would it ? Everyone else is even more f-ed.

A bit like the GFC2009, Asia is going to come out of this much quicker and less economically damaged than the west. 

Not of all of them will be less economically damaged, the one's that have too much reliance on tourism don't look very healthy.

[Thunder26]

And this is part due to a "successful" implementation of COVID 19 amelioration. 

 

The government chose and is continuing to choose the destroying of local economy. Tourism industry is being completely demolished. 

 

Even if there are almost no cases of the virus people cannot book hotels or travel for pleasure inside Thailand. Which is absurd. So many people lost their income because of this.

 

Their 5000 Baht is an insult to those people. Many of them have a house mortgage and a car leasing to pay which is obviously not enough. 

 

Instead of making things easier, the government chooses to make it more difficult for them. Beaches are still mostly shut and national parks are still shut.

 

However, they chose to open malls that are perfect for the virus spread, especially implementing their stupid rules to track people. It looks that they are not very good with logic, shooting themselves in the foot.

[PingRoundTheWorld]

14 hours ago, Zikomat said:

The next quarters will DEFINITELY be much worse. One doesn’t need a degree in science to understand it.

A degree in science? ???? (sorry, had to laugh)

 

But yeah, recession is quite an understatement. Second quarter GDP shrinkage in the double-digits for sure, and unless they do something to mitigate it (ease restrictions and reopen for tourism) third quarter will be a disaster.

[JonnyF]

The perfect storm for Thailand. All 3 main areas down. Manufacturing/Exports down due to COVID, tourism down due to COVID, agriculture down due to the drought (and COVID).

 

The scary thing is I don't see how any of these can bounce back quickly. Q2 will be horrendous. 

[kingdong]

6 hours ago, tribalfusion001 said:

Not of all of them will be less economically damaged, the one's that have too much reliance on tourism don't look very healthy.

Nor. will the countries who rely on exports,what with the high baht and the coming world wide recession ( depression? )there may be trouble ahead,if all the silly buggers who " sponsor" knocked it on the head the baht would collapse tomorrow.

[mrfill]

15 hours ago, Brunolem said:

Some countries show annualized GDP figures, while others show only the quarter, which explain the wide discrepancies from one to another.

 

A large part of the UK's economy is made of (criminal) financial transactions, run from the cesspool known as the City.

 

Crime never sleeps and never goes into recession.

 

Lucky Brits...

 

Since 2014 the UK GDP figure has included estimates for the illegal drug trade and prostitution. It raised the position of the UK from 6th to 5th largest economy.

https://quarterly.blog.gov.uk/2014/10/15/sex-drugs-and-gdp/