Post-COVID Thailand economy

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2020 is a year where every business of the world has experienced a major setback. However, 2021 is expected to provide newer opportunities for businesses to grow & spread wings. The coming year will be scope for international companies & independent traders for opening branches, starting new ventures in overseas lands. Thailand tops the list of locations for such prized business ventures.

All credits to the nation’s strict discipline and endurance, Thailand has recently been ranked as #1 with the highest Covid-19 recovery rate. Thailand also boasts as one of the Original tiger Economies. As per, BOI’s secretary’s words, Thailand is already working towards reviving its economy. Their main aim is to attract newer business investments.

But, in 2021, it is more crucial for businesses to list out expectations before starting off the venture. 2021 will be a year when we adapt to the new normal. Startup Consultants will play an important role in establishing the setups.

Economy predictions

The global economy would severely contract as most of the countries implemented containment measures causing disruptions. Consequently, this is severely affecting manufacturing, employment, private consumption, private investment, as well as merchandise exports, which is contracting across major advanced economies and Thailand’s trading partners in Asia. The Business Sentiment Index in Thailand rose for the third consecutive month to 42.9 in July of 2020 from 38.5 in the previous month. It is also the highest reading since March amid increases in almost all sectors except electrical appliances but still below the 50-threshold.

Overall financial conditions in Thailand have become more accommodating as reflected by the real policy interest rate, which declined and remained comparatively low. In addition, interest rates in Thailand’s financial market also declined.

Thanks to Thailand’s success in containing the spread of the virus, the effective exchange rate of Baht appreciated against the U.S. dollar. Adding to the strength of the Baht were sales of the U.S. dollars by those related to the sales of gold.

The Thai economy would contract remarkably in the end of 2020. Such would be observed across almost all economic growth components, except public expenditure. This is due to the COVID-19 pandemic and the containment measures implemented by governments in many countries including Thailand. This has led to temporary disruptions of global economic activities especially in the second quarter of 2020. Thailand’s tourism and merchandise exports are projected to contract, which would weigh on private consumption as a result of weakening income and employment. A fall in domestic and external demand would also lead to a sharp contraction in private investment. However, the public expenditure would play an important role in supporting the economic recovery in the days ahead. The third phase of government relief measures to alleviate the impact of COVID-19 would help merchandise exports, tourism, and domestic demand to exhibit a smaller contraction.

In 2021, the Thai economy is projected to expand at 5%, higher than previously assessed. This is partly due to the lower base in 2020, and as the government is expected to launch an additional employment stimulus package and large-scale investment projects. However, economic activities in Thailand are projected to remain substantially below its potential level. Thailand’s economic situation would sweep up through the gradual re-opening of the country under the travel bubble scheme, which would be done through partnerships between COVID-19-free countries, permitting traveling into targeted locations in each country. Also, there would be widespread availability of COVID-19 vaccines from the fourth quarter of 2021 onwards as projected. The value of Thai merchandise exports in 2020 would experience a sharper decline. This is in line with the outlook of trading partner economies and global trade volume, as well as supply chain disruptions in some businesses. Meanwhile, prices of merchandise exports are projected to decline, mainly owing to the prices of goods that are sensitive to movements in crude oil prices. Nevertheless, the gradual relaxation of containment measures in many countries would support the gradual recovery of merchandise exports.

In 2021, the value of merchandise exports is expected to expand, both in terms of volume in response to the recovery of the global economy and global trade, and in terms of price in line with the outlook of global crude oil prices. However, the value of merchandise exports would be below the pre-pandemic level, as external demand would yet to be fully recovered. In addition, changing patterns of business operations worldwide under the new way of life in the post-COVID environment would limit the potential of certain industries to fully recover. The tourism sector is projected to recover more slowly, as the outbreak in other countries is prolonged and widespread than previously expected. The Thai government is expected to maintain its travel restrictions on inbound foreign tourists for an extended period and would begin to gradually reopen the country for foreign tourists from certain countries under the travel bubble scheme in the second half of 2020.

Public expenditure would play an important role in shoring up the economy in 2020 and supporting the recovery in the period ahead. The government would introduce further measures to help those affected by the outbreak, which would partly help to sustain business operations and employment. Nevertheless, investment spending by state-owned enterprises is projected to expand, which would be a key mechanism to support the economy going forward. Private consumption is expected to contract in 2020, particularly in the second quarter. This is due to the containment measures, as well as a marked decline in non-farm income and weakening consumer confidence.

Resumption of economic activities

However, the gradual relaxation of containment measures will lead to a gradual improvement in economic activities in the period ahead. Private consumption is expected to grow at a level below the pre-pandemic level. This is because households are expected to be cautious in spending given high uncertainties surrounding the COVID-19 situation going forward. Furthermore, households’ financial positions would be more vulnerable given falling income and elevated debt levels. Private investment is expected to contract in 2020. This is on account of contractions in both domestic and external demand, as well as high levels of excess production capacity, which caused most businesses to postpone their investment plans. However, the government’s infrastructure investment projects were underway, particularly the public-private partnership (PPP) projects both within and outside the Eastern Economic Corridor (EEC).

As for 2021, some investment projects would likely continue, particularly large-scale infrastructure investment and infrastructure investment to support the digital economy. Going forward, the Thai economy would continue to face high uncertainties. Risks to the economic projection tilted downward and depended largely on the impact of COVID-19. There are possibilities that the Thai economy would outperform the baseline projection due to better-than-expected impacts of additional government’s stimulus measures to shore up domestic consumption and investment, measures to assist borrowers, public infrastructure investment and PPP projects which could incentivize the private sector to invest more than expected and more relocations of production base to Thailand thanks to the success in containing the spread of the virus.

After thriving through major setbacks in the first half of 2020, Thailand’s economy is all set to gear up into motion by early 2021. Thailand’s economy will see spurts of growth & will be one of the forerunners in the world economy to get back into the pre-COVID state. New businesses with the right planning & push will be able to get their footings strong at an early stage.

During the pandemic of 2020, the Thailand economy has seen a huge rise in the number of unemployment cases. People have been laid off in huge numbers. As companies start investing & doing business in Thailand, the workforce will see a major opening. Cheap & useful labor will be available for businesses. This will play a pivotal role in securing profits for startups.

The economic state of Thailand will be greatly dependent on startups securing a foothold in Thailand. It is the gateway to Asia; Thailand plays a two-way door to the economies & international startups.

Boost in the Tourism sector

The tourism industry will see a big surge in 2021 when we adapt to the new normal or go back to our lives with the boon of a vaccine. Thailand’s economy is greatly dependent on tourism. The businesses related to the trade will experience a boom.

Taking baby steps in setting up a business in Thailand is advisable at this stage. This would help to gain a foothold from the very beginning, Thailand economy starts to rise again.

Contact the Startup Specialists for doing business in Thailand.