Thai central bank says likely to slash GDP forecasts after new virus outbreak

[webfact]

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva

 

By Orathai Sriring and Satawasin Staporncharnchai

 

BANGKOK (Reuters) - Thailand's central bank is likely to slash its economic growth outlook for this year and next year as the country struggles with a rapidly spreading third wave of COVID-19 infections.

 

The new outbreak, driven in part by the highly transmissible B.1.1.7 variant, has caused over 26,000 cases and 46 deaths in just 25 days, dealing a blow to the tourism-reliant nation's efforts to reopen to foreign visitors.

 

Growth projections made in March had assumed that Thailand would be able to gradually reopen to vaccinated foreign tourists without requiring quarantine measures in the fourth quarter, senior central bank director Sakkapop Panyanukul told the Longtunman Youtube Channel late on Saturday.

 

"Given the current outbreak and vaccine efficacy, I must say that assumption is difficult," he said, adding that forecasts for 3% GDP growth this year and 4.7% next year will likely "have to be reduced quite a lot".

 

The economy could take six quarters to return to pre-pandemic levels and would be helped by improved exports, he said.

But the central bank's forecasts for 3 million foreign tourists this year and 20 million next year will be difficult to meet, Sakkapop said, adding that it may take four to five years before Thailand would see a return to pre-pandemic levels of 40 million foreign tourists a year.

 

The sector accounts for 11% of GDP and employs over 10 million people.

 

The BOT will keep financial conditions accommodative to support the economy, Sakkapop said, adding that for now there was "no need to use unconventional measures".

 

The BOT has kept its policy rate at a record low of 0.50% since mid-2020 and will next review policy on May 5. Most analysts see no policy change in the near future.

 

(Reporting by Orathai Sriring and Satawasin Staporncharnchai; Editing by Edwina Gibbs)

 

-- © Copyright Reuters 2021-04-26

 

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[PatOngo]

49 minutes ago, webfact said:

as the country struggles

I'm surprised they would admit this, must be an extreme loss of face!

[RobMuir]

1 hour ago, webfact said:

The new outbreak, driven in part by the highly transmissible B.1.1.7 variant, has caused over 26,000 cases and 46 deaths in just 25 days,

 

They did a top job against the Wuhan strain. Unfortunately this nasty UK strain is a different beast and it will kill thousands and be the final nail in the coffin for thousands of businesses that managed to scrape and scrimp through the last year.

 

Tragic.

[Brierley]

This is not good overall, the current account looks like it could remain in deficit for some time, this means the country will have to finance their imports....ouch.

[RichardColeman]

5 hours ago, webfact said:

The economy could take six quarters to return to pre-pandemic levels and would be helped by improved exports, he said.

If they think Thai exports will build the economy back up over 18 months with no tourists, then the baht is going to have to drop through the floor to make Thailand competitive enough. Raising prices again to make up the gap just wont cut it in a post pandemic world

[Brierley]

6 minutes ago, RichardColeman said:

If they think Thai exports will build the economy back up over 18 months with no tourists, then the baht is going to have to drop through the floor to make Thailand competitive enough. Raising prices again to make up the gap just wont cut it in a post pandemic world

I don't think exports are the problem, they've just seen their best month ever in March. The problem is the much wider balance of payments which comprises three financial groups of revenue

 

1) the difference between imported and exported goods and services - imported/exported goods is the headline figure of things shipped overseas that we see reported in the press each month, services is international tourism. The status of exported goods is not really an issue and despite falls, they have held up quite well, international tourism hasn't.

 

2) Primary Income is the net flow of interest, dividends and profit from overseas investments. Thailand pulled its outbound FDI to the UK in December, its outbound FDI is now the lowest its been for a long time. Low interest rates is a factor that affects overseas investment income, as is the US 10 year bond yield .

 

3) Secondary income is the flow of goods, services income or financial items from overseas, for which their is no quid pro quo, this is known as money for nothing. Examples of this include remittances from overseas workers and inbound investment in business and financial markets (bonds/SET). 

 

The problem is that not only has international tourism dried up but so has 2 & 3, the only thing that is buoyant is exports as we traditional understand them and they just broke a record in March. All three of those things are not under the direct control of the country whereas exports are. If the sum total of all those things is negative, Thailand has to find financing for its imports, which historically it hasn't had to do for a long time. Add to all of that the budget deficit resulting from freebies and giveaway programs for the past year and the picture does not look good at all. The bottom line is that if exports continue to do well and the global recovery continues, Thailand could do OK even without International Tourism.

 

[ukrules]

8 hours ago, webfact said:

The sector accounts for 11% of GDP and employs over 10 million people.

11% ????????

[Brierley]

15 minutes ago, ukrules said:

11% ????????

International tourism, not all tourism.

[Isaan sailor]

Bank of Thailand sees their interest rates at historic lows—and thus needs to take no action.  However, when you compare their .50 rate to USA or Euro or other rates—it sure seems high enough to attract more foreign capital—which can keep the Baht high.

[Brierley]

2 hours ago, Isaan sailor said:

Bank of Thailand sees their interest rates at historic lows—and thus needs to take no action.  However, when you compare their .50 rate to USA or Euro or other rates—it sure seems high enough to attract more foreign capital—which can keep the Baht high.

Indeed. The YTD return on THB is 4.87%, that's what's attracting the inflows, not the base rate:

 

https://www.bloomberg.com/quote/USDTHB:CUR

 

 

[Caldera]

"Likely" - good one.

 

[Excel]

5 minutes ago, Caldera said:

"Likely" - good one.

 

The only likely thing is whether GDP will slip into negative territory or not. later on. No doubt the amateur experts will chirp in now with a full page essay as to how that will not be the case and the economy is being well looked after. 

[hotchilli]

On 4/26/2021 at 7:07 AM, webfact said:

"Given the current outbreak and vaccine efficacy, I must say that assumption is difficult," he said, adding that forecasts for 3% GDP growth this year and 4.7% next year will likely "have to be reduced quite a lot".

 

[Brierley]

12 hours ago, hotchilli said:

 

If you had a job and you didn't get an increase at the end of the year, maybe you even had to take a couple of percent reduction because times were hard, would you say your salary went down the toilet!

[Brierley]

An interesting presentation pack from BOT (not for everyone) regarding covid and the economy outlook. Page 13 is of note: the economic cost of covid and the estimated time for recovery. The Asian Financial Crisis in 1997 caused a 14% loss of GDP and took 5 years to recover. Covid is estimated to cause a 13% loss of GDP and recovery will take 2-3 years.

 

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/MPR/Monetary Policy Report/AnalystMeeting_12021slide.pdf

 

[bkk6060]

They are saying 2.3% down from 2.8.

How?

40 million tourists gone.  My guess is Pattaya is in a severe depression unemployment negative over 50%,  general economy down 90%.

A major tourist city cannot survive on 7-11, coffee shops, some markets/street food and gas stations.

I would say nationwide this place is way in negative territory, not even close to any positive GDP.

[AlfHuy]

On 4/26/2021 at 3:38 PM, Isaan sailor said:

Bank of Thailand sees their interest rates at historic lows—and thus needs to take no action.  However, when you compare their .50 rate to USA or Euro or other rates—it sure seems high enough to attract more foreign capital—which can keep the Baht high.

But... the ones who exchanged $/£ and EUR a few months ago will have lost on exchange rate.

0,5 % interest but having lost a few % on exchange rate...

[AlfHuy]

On 4/28/2021 at 5:04 AM, Brierley said:

An interesting presentation pack from BOT (not for everyone) regarding covid and the economy outlook. Page 13 is of note: the economic cost of covid and the estimated time for recovery. The Asian Financial Crisis in 1997 caused a 14% loss of GDP and took 5 years to recover. Covid is estimated to cause a 13% loss of GDP and recovery will take 2-3 years.

 

https://www.bot.or.th/English/MonetaryPolicy/MonetPolicyComittee/MPR/Monetary Policy Report/AnalystMeeting_12021slide.pdf

 

And just yesterday I read that the RKI (Robert Koch Institut in Germany) predicts that Covid will be with us until end of 2022.