The number of inbound tourists has “severely contracted” by 76.4 per cent while exports dropped by 2.2 per cent year-on-year in March, said the Bank of Thailand (BOT) on Thursday.
The BOT added that the Thai economy has contracted at a higher rate in March when compared to February.
“The contraction is deeper [in March] where nearly all of the indicators have contracted, except for imports and public spending,” said Don Nakornthab, senior director for economics and policy at the central bank.
The number of inbound tourists has dropped to around 800,000 people which represents a 76 per cent year-on-year contraction compared to a contraction of 48 per cent in February.
The BOT also expects less arrivals in April as the company has shut its borders to contain the coronavirus outbreak.
“The latest number shows that there are around 40 foreign arrivals through 5 international airports each day so the contraction could be more than 99 per cent [in April],” Don said.
The value of exports contracted 2.2 per cent year on year in March and the statistics are even more severe when excluding gold at 6.5 per cent. Don expects similar numbers for April.
BOT said the drop in exports was due to lockdown measures in many countries which consequently led to the drop in economic activities and demand.
Imports
Imports value, expanded by 4.4 per cent year-on-year in March from imports of raw materials and intermediate goods, especially from China.
Nevertheless, if excluding gold, imports only expanded by 1.3 per cent while imports of consumer goods and capital goods continued to contract in line with weakening economic activities.
Don explained that import has climbed up in March from a heavy contraction in February so there is no real significance in the pick up in numbers.
Both manufacturing production and private investment continue to be low, in-line with weakening domestic and external demand.
Tim Leelahaphan, Thailand economist at Standard Chartered told Thai Enquirer that low private investment number will continue to hamper imports for the rest of 2020.
Public spending
Don said what is more important is public spending which expanded for the first time in 5 months following the disbursement of the delayed fiscal budget for 2020.
Current expansion in public spending is mostly from purchases on goods and services and compensation of civil servants. Capital expenditures from the central government and state enterprise have also expanded, he added.
Standard Chartered expects Thailand’s GDP to contract by 5 per cent in 2020. But, the prediction was made before the 1 trillion baht emergency loan come into effect and the loan will now soften the numbers, Tim said.
The BOT said last month that they expect the Thai economy to contract by 5.3 per cent this year.
Tim said any revision of their earlier prediction will depend on the effectiveness of the government’s ability to disburse the loan.
For example, the disbursement of the 5,000 baht cash handout worth 240 billion baht to 16 million people that began since the beginning of the month is still ongoing. Only 7.5 million people have received the aid so far.
Tim said public spending is the most important during April and May, even though 6 business groups are reopening in May.
He believes private consumption should be able to return around the end of the third quarter. Tourism is expected to return around the fourth quarter, especially from Asian and Chinese tourists.
Baht and interest rate
Standard Chartered expects the baht to strengthen from around 32.5 baht per US dollar right now to 31 baht by the end of the year.
This is due low private investment, low imports, and a slow return to normalcy.
For the policy interest rate, now at a historic low of 0.75 per cent, Tim expects the BOT to slash the rate by two more rate cuts this year to continue to support the economy.
He expects a 25 basis points cut at the next Monetary Policy Committee’s meeting on May 20 and another 25 basis point cut in the third quarter which would bring the rate down to 0.25 per cent at the end of the year.
The BOT does not have to be too aggressive like other central banks since many fiscal measures have been introduced already, he added.
