Thailand hits trough in Q2 but recovery to be drawn out: DBS

Both puppet and puppeteer don face shields in a performance at Bangkok's Erawan Shrine. With international tourism unlikely to return soon, Thailand is encouraging domestic tourism instead.
JULY 14, 2020 - 11:06 AM

THAILAND'S growth may have reached a trough in the second quarter of 2020, but the recovery is likely to be drawn out, with weak tourism and demand, said DBS Group Research economist Radhika Rao in a July 13 report.

DBS has lowered its forecast to a 7.5 per cent contraction in 2020, before a recovery to 3 per cent growth in 2021 on base effects. Its previous forecast of -5.5 per cent for 2020 was premised on a return to normal conditions in the second half.

Even as the Covid-19 infection curve is under control in the country -- the least affected among the Asean-6 -- this may not suffice to shield Thailand from a sharp contraction. This is due in part "to its reliance on global growth and a pandemic situation that is yet to stabilize, along with a slower turnaround in domestic activity", she wrote, identifying three soft spots for the economy.

Private sector activity

Thailand's economy began its gradual reopening in May, with the fifth and final phase of easing from July 1. Yet continued social distancing restrictions will still hurt demand.

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Private consumption of both durables and non-durables has continued to contract. Investment interest is also tepid, with a broad-based fall in private investment indices against the backdrop of a sub-par manufacturing and export outlook.

"As restrictions ease, we expect private sector indicators to bottom-out and turnaround, but retracement higher is likely to be slower than we assumed earlier," said the report.


Tourism's weakness began in February and continued into June, with international travel coming to a virtual standstill in April and May. The second quarter "is also likely a washout" as most borders remain closed except for returning residents.

The Tourism Authority of Thailand projects an 80 per cent fall in arrivals for the full year, making for a 79 per cent fall in associated revenues.

Plans to create travel bubbles have hit a snag with fresh outbreaks in some planned partners. This is likely to delay potential tourist arrivals beyond the earlier timeline of September, well into the fourth quarter or beyond. Domestic tourism is being prioritised instead, with a 22.4 trillion baht package announced in June to encourage this. 


Key export categories such as electronics and agriculture saw firmer performance in March and April, but weakened in May.