The COVID-19 crisis, an unexpected pandemic, has impacted the world, including Thailand. Today, how severe are the wounds inflicted on the "Thai economy"? Is it worse than past crises? And how long will these scars remain? Follow this analysis to find out.

As soon as the Bank of Thailand (BOT) announced its latest economic forecast for 2020, projecting a contraction of 8.1%, it sent shockwaves through the financial markets and investors. This figure is the lowest on record and worse than the Tom Yum Kung crisis, reflecting the severe impact of COVID-19 on the Thai economy. Many are still uncertain about when the outbreak will end.

The root cause of this crisis differs from previous ones, which were often triggered by financial or real estate sectors. This time, the onset came from a pandemic that spread globally, necessitating strict preventive measures that halted most economic activities temporarily, leading to significant unemployment. If we compare the global and Thai economies to runners in a race, COVID-19 is like a stone that causes all runners to trip and fall suddenly, leaving them with widespread injuries.

The following question arises: How severe are the wounds of the Thai economy? Will the symptoms from this injury be worse than past crises?

The first answer is that the size of this wound is both large and deep. The "large" aspect refers to the widespread impact, as citizens cannot live their daily lives normally, and businesses in both the service and industrial sectors face a drastic decline in demand, particularly small businesses that were already fragile. The "deep" aspect refers to the severe economic contraction, especially in the tourism and export sectors.

Regarding whether the severity of this injury is worse than in the past, the answer depends on: 1) the health of the Thai economy before the injury occurred, and 2) the methods used to treat the economic wounds.

1) Checking the health of the Thai economy before stumbling over the stone indicates that the runner was strong and had received vaccinations against diseases, reducing the chances of complications. Thailand's financial sector is robust, with banks having experience from the Tom Yum Kung crisis, as evidenced by continuously increasing capital ratios to risky assets, which are well above the BOT's requirements. This allows for measures to assist debtors and provide liquidity to affected businesses during times of no income, as well as extend credit to businesses during recovery without worrying about a debt crisis spiraling into a financial crisis.

The business sector is also strong, relying less on foreign debt and mostly hedging against exchange rate risks. The government has maintained fiscal discipline, with public debt levels remaining below international standards, allowing for space to assist through economic stimulus measures during the deep wound phase and recovery measures in the future when the economic wounds begin to heal.

Meanwhile, Thailand's external stability is strong, as evidenced by a consistently high current account surplus over several years and high foreign reserves, enabling the BOT to lower policy interest rates in a volatile international capital movement environment. In other words, Thailand has high immunity in almost every aspect.

2) Methods of treating economic wounds In terms of public health, Thailand has been quite successful, but this has had severe side effects on the Thai economy, as many economic activities had to be halted, resulting in deep wounds. It is expected that the Thai economy will contract the most in the second quarter, during which Thailand employed strong measures to treat the economy through a combination of fiscal and monetary policies.

From past experiences, policymakers or surgeons know that stabilizing the patient's pulse early in a crisis through substantial financial and fiscal measures is preferable to letting the patient deteriorate to the point of needing resuscitation, which is much more costly in the long run.

Currently, Thailand has not reported new domestic cases for several consecutive days and has received international praise for being among the top countries managing the COVID-19 outbreak effectively, prompting the government to begin easing various measures and businesses to gradually reopen. It can be said that “the worst is over.”

In the near future, the Thai economy is expected to gradually recover. The symptoms of the economic wounds should ease as the COVID-19 situation in Thailand and many countries shows signs of improvement. However, vigilance against a potential second wave of outbreaks remains necessary. The focus for treating the Thai economy during this period should be on "tonics," particularly funds from government employment and large investment stimulus projects that will be rolled out, which presents a challenge for policymakers to target effectively.

Combined with the "exercise" of patients through the development of labor skills, both upskilling and reskilling, to align with the changing business landscape moving forward, often referred to as the New Normal, especially in entering the digital world. These factors are reflected in the BOT's economic forecast, which anticipates a growth rate of 5.0% in 2021.

In this economic crisis, Thailand has good immunity in almost every aspect. Even though the wounds are deep, they are not infected and do not leave large scars on the Thai economy, as reflected in the deepest contraction in the second quarter, which has now passed, and the economy is expected to gradually improve and return to growth next year.

However, recovery still depends on both domestic and international factors, including the use of fiscal measures, which act as targeted tonics through employment, labor skill development, and investment in large infrastructure projects that align with the new world order in the future.

SOURCE : www.bangkokbiznews.com