• The Thai economy in the first half of 2021 performed better than expected, with the economic figures for Q2/2021 showing a growth of 7.5% YoY, resulting in a 2.0% YoY growth for the first half of 2021. However, compared to the previous quarter, the Thai economy only grew by 0.4% QoQ, indicating that the momentum of the Thai economy remains weak due to the impacts of the COVID-19 outbreak. Overall, the Thai economy in Q2/2021 expanded by 7.5% YoY, primarily driven by low base effects and a surge in exports, with exports in Q2/2021 growing by 36.2% YoY in USD terms, aligning with the global economic recovery and pent-up demand. Meanwhile, private consumption and private investment in Q2/2021, although showing growth compared to the same period last year due to a low base, contracted by -2.5% QoQ compared to the previous quarter, as the new wave of COVID-19 affected consumer and business confidence.
  • However, the COVID-19 outbreak situation is more severe than previously assessed, which will impact the economy more than expected, leading the Kasikorn Research Center to revise its economic forecast for Thailand from an expected growth of 1.0% to -0.5%. The details are as follows:
    - The current COVID-19 outbreak is expected to be more prolonged and severe than previously estimated in July. It is anticipated that daily infection numbers will peak in September and gradually decline, but it is unlikely that the situation will be controlled or that daily infections will drop below 1,000 before Q4 of 2021.
    - Therefore, the government is expected to maintain strict lockdown measures for at least two months (starting July 2021), which will have subsequent economic impacts. Although the government has implemented measures to alleviate the effects on affected businesses and employees, it is unlikely to fully compensate for the impacts, leading to a forecasted contraction in Thailand's GDP growth in Q3/2021 compared to the same period last year and a decline of -3.5% and -4.9% compared to the previous quarter, respectively. Additionally, while the government may gradually ease lockdown measures for some businesses, if the number of infections remains high and the vaccination rate is still low, consumer confidence is unlikely to return to normal, which will continue to affect economic activities and hinder a rapid recovery.
    - Regarding the impact on the tourism sector, the number of tourists visiting Thailand may be lower than expected due to concerns over the COVID-19 outbreak. The spread of the Delta variant has led to an increase in infections in many countries, including Thailand, prompting the Kasikorn Research Center to predict that the number of tourists visiting Thailand this year may decrease to around 150,000, despite the initiation of the "Phuket Sandbox" and "Samui Plus Model" programs to welcome foreign tourists.
    - Meanwhile, the manufacturing sector faces heightened risks from outbreaks in factories. If the outbreak remains uncontrolled, it could lead to factory closures and affect the production chain, which may impact the export sector, a key driver of Thailand's economy this year. Additionally, this could lead to domestic shortages of goods at certain times. Nevertheless, the global economic recovery, particularly in the US and EU, along with a weaker Thai baht, is expected to support continued high growth in Thai exports this year.

In summary, the Kasikorn Research Center has revised its outlook for Thailand's economy in 2021, now expecting a contraction of -0.5% due to greater-than-anticipated economic impacts from the pandemic as of July. The ongoing outbreak situation, with daily cases potentially not yet peaking, suggests that lockdown measures may extend longer, while the risks to monitor remain focused on controlling outbreaks in the manufacturing sector, which could affect exports and lead to domestic shortages at times.

Table 1: GDP Growth by Expenditure Components

Table 2: GDP Growth by Production Sector

Source: NESDC, compiled by Kasikorn Research Center

Table 3: Economic Forecast for Thailand in 2021

Source: Kasikorn Research Center

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