KASIKORN RESEARCH CENTER (KResearch) holds the view that the Thai economy in 2021 may post higher growth than it previously estimated in light of the easing of lockdown restrictions and the government's sooner-than-expected reopening of the country after the vaccination rollout has seen faster progress than was forecast in August. The Thai economy has also received a boost from the government's higher-than-expected budget disbursement.
Ms. Nattaporn Triratanasirikul, KResearch Assistant Managing Director, said that the relaxation of lockdown restrictions and the country's reopening plan - launching sooner than previously projected - has prompted KResearch to raise its projection of international tourist arrivals to 180,000, slightly higher than the prior estimate of 150,000. Overall, the Thai economic growth projection has thus been upgraded to 0.2 percent from the previous forecast of a 0.5-percent contraction. Nonetheless, the recent flooding and the soaring cost of living amid a spike in oil prices, as well as the risk of a COVID-19 resurgence after the country's reopening, all continue to inhibit the economic growth projection for 2021.
Meanwhile, Ms. Kevalin Wangpichayasuk, KResearch Assistant Managing Director, said that the impact of floods on the Thai economy will primarily be felt in 2021. Flooding during September-October 2021 is expected to damage approximately 6-7 million rai of farmland. Non-agricultural sectors, particularly the service sector, plus daily wage workers have also been affected by the suspension of business due to the flooding, impacting areas over 30 provinces across Thailand. Given this, related economic losses are projected to reach roughly 25 billion Baht, amounting to 0.16 percent of GDP, a figure less severe than the losses recorded during flooding in 2008, 2010 and 2017. That estimated economic loss has been factored into KResearch's 2021 economic growth forecast.
For 2022, Ms. Nattaporn views that the Thai economy may grow 3.7 percent as the vaccination rate in Thailand is projected to exceed 70 percent, thus allowing the government to lift lockdown measures while more businesses can resume their activities. Additionally, Thai exports are another positive factor. Household spending will likely rebound, thanks to the low base of 2021. Households may be ready to release their pent-up demand following the COVID-19 lockdowns despite risks stemming from high energy costs and inflation. At this time, the Thai economy has not entered a period of stagflation. Inflation for 2022 is projected to be at 1.6 percent, provided that global oil prices do not surge above USD 100 per barrel for a prolonged period.
Regarding the impact of high oil prices on business in 2021, Ms. Kevalin views that, if diesel prices remain within the range of THB 25.0-29.2 per liter for the rest of this year, the production costs of the business sector will increase by approximately 0.55-0.73 percent, while transportation costs will rise by around 0.33-0.44 percent. Altogether, operators would have to bear an average cost increase of 1 percent. Amid a general surge in prices for other types of oil, diesel prices are managed by the government's price mechanism. Since other costs may tend to spiral amid fairly stagnant sales, the prospect of recovery for various businesses becomes only more challenging. That said, oil prices should still be monitored going into 2022.
Source: Kasikorn Bank