Thailand: A gradual recovery, at last

Thailand’s economy has started to see the light at the end of the tunnel, after being battered by the pandemic over a very difficult 2020-21.
Chua Han Teng16 Nov 2021
  • Thailand’s economy is embarking on a recovery amid a receding pandemic
  • Domestic demand should benefit from looser curbs, rising vaccinations and uptick in confidence
  • Tourism is emerging from its doldrums, but unlikely to see a full recovery in 2022
  • Economic policies are likely to remain supportive and synchronous to limit scarring
  • Implication for our forecasts: Maintain 2022 GDP forecast of 3.5%; lift 2021 projection to 1.2%
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This is a summary of the report, please download the PDF for the full report and charts

Thailand’s economy has started to see the light at the end of the tunnel, after being battered by the pandemic over a very difficult 2020-21. The economy shrank in 3Q21, but outperformed expectations (-0.3% YoY, -1.1 QoQ seasonally adjusted (sa); consensus: -1.3% YoY, -4.0% QoQ sa), and this likely marked the bottom. Relaxation of domestic virus containment restrictions and re-opening of international borders amid falling infections and rising vaccinations, should drive the economic revival into 2022, in our view.

That said, the recovery pace towards pre-pandemic levels is likely to be gradual. Consumer and business confidence have started to benefit from looser virus curbs and should continue to tick higher, but have some room to catch up from still weak levels. The recovery in the crucial tourism sector is likely to gain some traction, but is unlikely to reach 2019 heights next year, largely due to quarantine requirements at key departing countries such as China (see page 3 of PDF).

Thailand faces considerable scarring risks, and the fragile recovery is also fraught by external uncertainties including China’s slowdown and rising global energy prices. We thus maintain our 2022 real GDP growth forecast of 3.5%, from an upwardly revised rate of 1.2% in 2021 (from 0.6%). Thailand remains a regional laggard, with a return of real GDP levels to pre-pandemic levels only towards end-2022/early-2023 (See page 2 of PDF for charts that gauge Thailand’s pandemic and economic dynamics).

Given the still delicate economic recuperation and considerable scarring risks, we therefore expect economic policies (monetary and fiscal) to remain synchronous and accommodative over the coming quarters, as policymakers aim to provide continued support to the nascent recovery (see page 5 for charts).

To read the full report, click here to Download the PDF.

Chua Han Teng, CFA


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