Thailand seem ill-prepared for life without tourists as a third wave of the coronavirus hits, the Southeast Asian country. Thailand needs to wean itself off this economic crutch, however political instability stands in the way.
Gorgeous beaches, spicy food and temples draw a steady stream of travellers. The industry generated $60 billion in international tourism receipts in 2019, with each arrival spending $1,520 on average per visit, making it one of the world’s most profitable destinations. World Bank data put the industry’s total contribution to GDP at $100 billion in 2018, about one-fifth of activity.
Hopes of a sharp rebound in visitors have now been dashed. Infections began shooting up around the same time as in India, showing a similar rise. The government, run by former general Prayuth Chan-ocha, failed to secure enough vaccines; Thailand has fewer shots per capita than Myanmar or Laos, per an Oxford University study.
Reuters estimates only 1% of the population has been fully jabbed. That makes it near impossible for Bangkok to pitch travel bubbles, especially with markets like China where inoculation has also proceeded slowly, making officials wary of re-opening borders.
Thailand’s middle income trap
Finance officials have now revised down their 2021 GDP growth forecast to 2.3% from 2.8%. The central bank held the benchmark interest rate steady at 0.5% on Wednesday, which leaves a little room to ease but not much. A weak baht is a blessing because the exports of goods and services account for a whopping 60% of Thai GDP, making it one of the most export-dependent economies in the world.
Thailand already suffers from the “middle-income trap”, and signs of stagnation are increasing. The poverty rate has been rising since 2015 per World Bank data. Tourism pads such traps by creating jobs for low-skilled people, but it doesn’t upgrade their skills much. Nor do hotels, restaurants and massage parlours generate much innovation. In Thailand, tourists also support darker industries: prostitution and narcotics.
An indefinite tourism freeze puts pressure on the government to upgrade other parts of the economy, especially the key electronics, automotive and health sectors. And it will be a struggle to attract foreign direct investment against the backdrop of a simmering pro-democracy protest movement. But simply waiting for foreign visitors to return is not an option.
– Thailand’s central bank left its key interest rate unchanged at a record low of 0.50% on May 5, preserving its limited ammunition to support Southeast Asia’s second-largest economy struggling with a third wave of coronavirus infections.
– Thailand’s finance ministry on April 29 reduced its 2021 economic growth forecast to 2.3% down from 2.8% growth.
– As of May 3, Thailand’s infection rate had returned to 87% of peak levels and was still rising, with nearly 2,000 new cases on average each day according to the Reuters Covid-19 Tracker.