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Thailand GDP expands 4.5% in Q3, buoyed by tourism

Private spending also helps economy mimic pre-COVID era but inflation weighs

BANGKOK -- A reinvigorated tourism sector not only helped Thailand's gross domestic product to a year-on-year 4.5% expansion for the third quarter but also gave a big boost to personal consumption, the National Economic and Social Development Council (NESDC) announced on Monday.

The economic lift came despite inflation taking a toll.

Thailand shifts to European, U.S. tourists to rely less on Chinese

Thailand, singapore tourists jump in line as japan opens borders, thailand asks business to power down as leaders arrive for apec, malaysia's q3 gdp grew 14.2%, highest in over a year, thai banks' interest rate hikes spark economic concerns, japan gdp shrank annualized 1.2% in q3 amid weak yen, inflation, thai shrimp output plunges by half from peak as disease spreads, indonesia bags pledges for $71bn from g-20 presidency: jokowi, indonesia, philippines hike key rates in bid to tame inflation, latest on economy, china's consumer prices climb on lunar new year demand, south korean central bank proposes lower pay for foreign care workers, japanese household spending logs biggest drop in 35 months in january, sponsored content, about sponsored content this content was commissioned by nikkei's global business bureau..

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Reimagining travel: Thailand tourism after the COVID-19 pandemic

Thailand’s economy is reliant on international tourism, a once-flourishing sector that has been impacted by pandemic restrictions. But there have been continual government efforts to boost domestic travel, and measures to support returning international demand after Thailand began reopening to vaccinated international travelers from 63 countries on November 1, 2021. 1 Pasika Khernamnuoy and Katie Silver, “Thailand reopens to vaccinated tourists from over 60 nations,” BBC, November 1 2021, bbc.com. Even as the world addresses emerging variants of the virus, Thailand’s lessons can act as a guide for other tourism-dependent countries facing similar dilemmas as they prepare for the resurgence of international travel.

A heavy blow, adjustments needed to support recovery

In 2019, Thailand ranked eighth globally in international tourist arrivals, with China being a key source market. 2 United Nations World Tourism Organization (UNWTO). Thailand recorded a high of 40 million visitors in 2019, with the top three spending categories for inbound visitors that year being in accommodation (28 percent), shopping (24 percent of spending), and food and beverages (21 percent). 3 “Summary of tourism income and expenses from foreign tourists entering Thailand in 2019,” Ministry of Tourism & Sports, October 28, 2020, mots.go.th. Furthermore, the Thai tourism sector created 36 million jobs between 2014 and 2019. 4 “Dashboard SME big data,” Office of Small and Medium Enterprises Promotion, accessed October 2021, sme.go.th.

Unfortunately, the pandemic and related restrictions have hit travel particularly hard, as international travel plunged. Passengers on international flights to Thailand dropped by 95 percent in September 2021, compared to the previous year. Hotels, in turn, only filled 9 percent of their rooms (Exhibit 1).

This decline in visitors had an outsize impact on tourism spending, as international travelers spent significantly more than their local counterparts (Exhibit 2). For instance, in 2019, international travelers made up 33 percent of overall travelers in Thailand yet accounted for almost 60 percent of all tourism spending—international tourists spent $1,543 per traveler on average, compared to $152 by domestic travelers. 5 “Tourism statistics 2019,” Ministry of Tourism & Sports, accessed October 2021, mots.go.th. This drop in expenditure undoubtedly caused a ripple effect on Thailand’s food and beverage retail industries, which include 1.2 million small and medium-size enterprises (SMEs). 6 “How to start business,” Office of Small and Medium Enterprises Promotion, accessed October 2021, sme.go.th.

Recovery appears to be on the horizon for Thailand. Assuming virus recurrence, slow long-term growth, muted world recovery, and minimal changes to global tourism strategies, Thailand’s tourism sector could only recover to pre-crisis levels by 2024.

Given that Thailand’s GDP relies significantly on foreign tourism income, the domestic tourism market alone is not sufficient to bring the nation’s tourism revenue back to 2019 figures; the sector’s recovery would depend on a resurgence in international travel (Exhibit 3). Globally, this recovery scenario would likely reshape the landscape of the world’s travel industry and create a strong imperative for both the public and private sectors to act to ensure the industry’s survival.

Efforts to stimulate tourism

Thailand has deployed various efforts to compensate for the loss of inbound tourism. Given that for most of the first quarter of 2020, Thailand saw less than 1,000 daily COVID-19 cases nationwide, with cases not rising above 4,000 until November 2020, domestic tourism was still a viable option for travelers. The Thai government’s attempt to boost domestic travel took the form of providing subsidies for hotel stays and flights for travelers. The government also rolled out measures to stimulate international travel to Thailand’s beach destinations and attract high-end travelers from international markets.

Travel together—stimulating domestic tourism

In August 2020, the Thai government launched the Rao Tiew Duay Gun (We Travel Together) program, where it set aside a budget of $640 million to help boost domestic tourism. 7 “Thailand approves domestic tourism package worth 22.4 billion baht,” Tourism Authority of Thailand Newsroom, June 17, 2020, tatnews.org.

The government subsidized a total of six million nights of hotel accommodation at 40 percent of normal room rates. The subsidy was capped at 3,000 baht ($100) per night for up to five nights. Subsidies for other services, including food, were capped at 600 baht ($20) per room per night. This subsidy was initially limited to facilities outside tourists’ home provinces, but that restriction was lifted in the second phase of the rollout in December 2020. In addition, domestic tourists traveling by air would qualify for a government refund of 40 percent of the ticket price. This was capped at 1,000 baht ($32) per seat, with a quota of 2 million seats.

The program reached its total quota of six million hotel-room nights in February 2021, seven months after its launch. 8 “FPO reveals the money we travel together, 20,000 million,” Bangkok Business News , January 4, 2021, bangkokbiznews.com; “‘We travel together’ the parade has already reserved 6 million rights. But there are still 1.35 million rights left!” Bangkok Business News , February 8, 2021, bangkokbiznews.com. During that time, at least $1 billion had been added to the Thai economy. 9 “NESDB-TAT has not yet knocked on ‘we travel together, phase 3,’” Thai PBS News , March 16, 2021, news.thaipbs.or.th.

Many operators grasped this opportunity, shifted their focus to the domestic market, and attracted local travelers by promoting flights and hotels in collaboration with the We Travel Together campaign. Destinations that once served mainly international visitors welcomed more local travelers, which has helped their economies wade through this difficult period. Many luxury hotels offered deep discounts and attractive promotions to capture the medium- to high-spend domestic-tourist segment.

These efforts to stimulate domestic travel were temporarily paused as COVID-19 cases reached a new high in July 2021. Domestic air travel in and out of red zones, including Bangkok, was banned during July to September 2021 in response to the nation’s effort to control the spread of the Delta variant. 10 “Domestic flight bans in force,” Bangkok Post , July 21, 2021, bangkokpost.com. Phase three of the We Travel Together campaign was paused during the same period, but resumed in October 2021.

Bringing back international travelers with the ‘sandbox’ approach

Despite promotional efforts for domestic travel, Thailand’s total revenue from domestic travel still saw a significant dip. The country’s revenue from domestic travel dropped from $34.5 billion to $15.4 billion in 2020. An increase in domestic spending alone would not compensate for the impact of the pandemic on the Thai economy. The country has largely been dependent on international markets, which represented about $62 billion or 60 percent of total tourism spend in 2019. 11 “Tourism statistics 2019,” Ministry of Tourism & Sports, accessed October 2021, mots.go.th.

In response, Thailand launched the “Phuket Sandbox” in July 2021, an effort to recapture demand from international travelers. The initiative offered fully vaccinated travelers (between 14 days and one year before their travel date) exemption from quarantine, provided they remain in Phuket for at least 14 days before traveling to other parts of Thailand. 12 “General information—Phuket Sandbox,” Tourism Authority of Thailand Newsroom, October 1, 2021, tatnews.org. Additionally, travelers’ stay in Phuket was restricted to accommodation establishments that have been certified by the Safety & Health Administration of the Thai government. Visitors staying in Phuket for less than 14 days were permitted to leave Phuket only if their destination was outside of Thailand.

The model hoped to draw visitors during the year-end season in Asia, Europe, and America—all key origin markets for Thailand. Several other reopening plans followed, including the “Samui Plus” and “Andaman Sandbox” plans. 13 “Samui Plus plan to generate B180m,” Bangkok Post , July 18, 2021, bangkokpost.com; “‘Adaman Sandbox’ next on govt agenda,” Bangkok Post , July 21, 2021, bangkokpost.com. Together, the schemes created a network of reopened destinations, which hoped to position Thailand as an attractive destination for international and domestic travelers alike.

The economic uplift from the Phuket Sandbox were moderate. In the period from July 1 to August 31, Phuket welcomed about 26,400 visitors, who were estimated to have spent at least $48.8 million while staying on the resort island (Exhibit 4). 14 “Phuket Sandbox generates B1,634m in two months,” Bangkok Post , September 5, 2021, bangkokpost.com.

A nationwide rise in COVID-19 infection rates in the same period meant that the government had to reconsider social distancing and other measures to minimize risk to visitors.

In any case, Thailand has gathered its learnings from the “sandbox” approach and proceeded to reopen the country to receive international travelers. As of November 1, 2021, the Thai government commenced a phased reopening of the country, allowing fully vaccinated tourists from 63 low-risk countries to visit with one day of quarantine, provided they pass a COVID-19 test upon arrival. The government has also replaced the slow-paced Certificate of Entry (COE) system with the Thailand Pass System, in an effort to make the documentation process of travelers entering Thailand more efficient than the COE application. 15 “Thailand pass,” ThaiEmbassy.com, accessed on November 1, 2021, thaiembassy.com.

The program also expanded the number of provinces open to international visitors to 17, including major tourism destinations such as Bangkok and Chiang Mai. Subject to readiness, additional major provinces are expected to reopen from December 2021 onwards. To ensure visitor safety, some COVID-19 measures remain in place, although most businesses have been allowed to reopen and nighttime curfews have been lifted in almost every province. The reopening has welcomed tourists globally, with top visitors coming from Thailand’s key source markets—the United States, Germany, and the United Kingdom (Exhibit 5).

Attracting ‘quality’ travelers, with an eye on new markets

Pre-COVID-19, China was one of the main contributors to Thailand’s tourism income, accounting for more than 27 percent of 2019 tourism receipts. 16 “Tourism statistics 2019,” Ministry of Tourism & Sports, accessed October 2021, mots.go.th. Given the current prudent approach of the Chinese government toward international travel, the road of return for Chinese visitors to Thailand will be a long one. China’s international-flight seat capacity and passenger numbers remain down by 95 percent  compared to pre-COVID-19 levels, and stringent public-health measures for international travel remain in place. Thailand, therefore, needs to reimagine its strategy and try to capture new sources of international travelers in markets where there are more rapid recoveries of international travel demand.

The situation may change rapidly, particularly in these volatile times; closely monitoring the revival of these top source markets, particularly around the country’s stance towards viral control measures, will help industry players plan their recovery efforts and capture untapped value.

Recognizing these shifting traveler trends, and the resilient nature of premium traveler groups, the Thai government is striving to attract “quality” travelers from these source countries. Measures include revisiting and relaxing certain regulations—such as yachting regulations and taxes on personal belongings and luxury goods—to improve and stimulate the premium travel experience.

Taking this a step further, the Thai government is preparing to launch a long-term residence program to attract foreigners to the country through new Long-Term Resident (LTR) visas (up to ten years), tax and investment incentives, foreigners’ residential property ownership relaxations, and more. The program will target four key personas: the wealthy global citizen, the wealthy retiree, the work-from-Thailand professional, and the high-skilled professional. The country’s ambition is to welcome over one million of these target personas and generate over 1 trillion baht in domestic spending in the next five years, beginning in 2022.

Emerging from the storm: Actions for travel and tourism

Thailand has put innovative measures in place to help its vitally important travel and tourism sector wade through the COVID-19 crisis. As new variants of the coronavirus emerge, health and safety should remain the foremost priority as countries contemplate their travel programs. Once it is safe to do so, there are actions that stakeholders can take to steer into and thrive within the next normal.

Adjust offerings and pricing strategy to meet market needs. Hotels, tour operators, restaurants, and transport providers could look to explore opportunities to offer services and products that meet new travel demands.

Bundle products, such as hotel and flights, offer upselling and cross-selling opportunities as well as a diversified revenue stream.

Travel companies could also devise and deploy targeted pricing strategies to drive long-term loyalty and stickiness for when international travel fully returns. Given the phased reopening of popular provinces in Thailand, and the inclusion of more visitors from select countries on a quarantine-exemption list, travel companies can leverage data on traveler behaviors to set the right prices and conduct targeted campaigns by country of origin and destination.

Explore opportunities within the mass-affluent traveler segment. Focusing on premium travel experiences may be a viable strategy in some markets, but it may have limited impact in Thailand. Given that the top three inbound visitor-spending categories in 2019 were shopping, accommodations, and food, targeting the high-end market would only benefit a small segment of travel companies and would not contribute to the country’s economic recovery across all relevant sectors.

By promoting more differentiated travel experiences and attractions such as ecotourism and cultural tourism, which are naturally location based and sought after by younger mass-affluent travelers, operators could contribute to greater aviation and transportation use in Thailand.

Form partnerships across the travel ecosystem. As a result of the government’s We Travel Together program, which subsidizes travel through a digital redemption mechanism (the Pao Tang app), the country has seen an estimated 30 to 40 million users join and use the platform. 17 Krung Thai Bank equity research, April 2021. This has created an opportunity for domestic consumer data to be collected and analyzed to provide more personalized tourism offerings that consumers are more likely to consider spending on.

Taking this a step further, tour operators, restaurants, and shopping malls might link up, creating a connected ecosystem where a traveler could be strategically engaged through multiple personalized services, products, and loyalty programs along their journeys.

Expand the network of destinations. There is an opportunity to offer travelers a wider variety of destinations in first- and second-tier cities, such as Nakhon Si Thammarat, Chiang Rai, Nakhon Nayok, Ratchaburi, and Loei. These locations have been able to sustain visitor numbers at a relatively low rate of decline, largely due to domestic travelers looking for new places to visit during international travel restrictions.

With a boost in promotion and appropriate infrastructure investment, tourism will not only contribute to the survival of the industry in these cities, but it could also lead to enduring tourist appeal that extends beyond domestic traveler groups, especially with the gradual return of international visitors. For example, the Tourism Authority of Thailand is collaborating with airlines to offer direct flights to alternative second-tier tourism destinations.

Leverage digital to connect, attract, and retain travelers. Travel companies can digitalize the customer journey from check-in through payment, including the provision of maps and information. Traveler preferences can be tracked in real time to design better and more relevant offerings, while digital booking channels can target different customer segments. Digital marketing can also entice visitors to return and to share their experiences on social media.

For instance, the Tourism Council of Thailand is working with Singapore-based IsWhere to deploy a digital-marketing platform for tourism business operators to better connect and engage with a potentially sizeable number of domestic and international travelers; the platform’s prior partnership with a major tech company has enabled it to reach 600 million digital customers worldwide.

Reimagine support needed by industry players. In the short term, industry players would need stimulus, support, and guidance on health and safety policies from the government. In the medium term, small and medium-size players would benefit from the government’s support in adjusting to online travel services and digital marketing, such as a one-stop digital platform to connect industry players with international travelers.

As such, the Tourism Authority of Thailand announced its plan to establish a private digital firm to work on creating a digital infrastructure for tourism, utilize big data in the industry, and potentially introduce blockchain-based e-vouchers and nonfungible tokens to provide tourism operators with more options for reaching travelers online and offline.

In the wake of the COVID-19 pandemic, tourism recovery in Thailand will be gradual and complex and requires varied strategies from both industry and government. As the world eagerly prepares for the eventual revival of international travel, Thailand and other countries can draw important lessons from its experience during this difficult interim period.

Steve Saxon is a partner in McKinsey’s Shenzhen office; Jan Sodprasert is a partner in the Bangkok office, where Voramon Sucharitakul is an associate partner.

The authors wish to thank Margaux Constantin , Kamila Dolinska, Steffen Köpke, Alan Laichareonsup, Jason Li, Georgie Songsantiphap, and Jackey Yu for their contributions to this article.

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Thailand Economic Focus: tourism industry plummets amid COVID-19 pandemic

21 July 2020

  • For an economy whose staple is travel, Thailand’s tourism industry is taking a major hit amid the COVID-19 pandemic.

For an economy whose staple is travel, Thailand’s tourism industry is taking a major hit amid the COVID-19 pandemic. Tourism is a major economic contributor to Thailand, with tourist receipts accounting for 11.5% of GDP in 2019, more than doubling from 5.2% in 2009. In addition, Chinese tourists account for the lion share of tourist arrivals, clocking 27.5% in 2019, followed by Malaysia (10.5%) and India (4.9%).

While the massive fiscal stimulus packages are surely welcomed by both corporates and individuals, tourism and its related industries such as hospitality, retail and transport will likely continue to drag on growth into the year ahead. According to the Ministry of Tourism and Sports, tourist arrivals had fallen to zero in April and May 2020 given the incoming travel ban then. For 2020, the Bank of Thailand expects tourist arrivals to clock merely 8 million persons (down from a prior outlook of 15 million persons, or a fall of 80% y/y), compared to 39.8 million persons in 2019.

According to UNCTAD , Thailand is one of the most heavily affected countries and stands to lose approximately US$47 billion in GDP for 2020 due to the contraction in tourism. Skilled workers in the tourism sector are expected to lose around 12% of their wages. For unskilled labors, employment is projected to decline 17% if the tourism sector is stopped for 4 months in Thailand.

COVID-19 hits Thailand hardest in tourism-reliant ASEAN

To cope with a fall in tourism demand in the wake of the COVID-19 outbreak, the Cabinet approved two stimulus packages worth THB22.4 billion to boost domestic tourism. Under the We Travel Together promotion worth THB20 billion, the government will subsidize 40% of domestic airfares for up to 1,000 baht per seat and 40% of hotel room rates for up to 3,000 baht per night. Additionally, the Moral Support promotion , worth THB2.4 billion, will help fund holidays for 1.2 million health officials and volunteers. The funding for the two packages comes from the 1.9 trillion-baht economic stimulus package intended to cushion the impacts on Thailand’s economy and the Thai people from the COVID-19 pandemic.

As the tourism stimulus measures will likely trigger spending across Thailand during the third quarter of 2020, many issues including improving human capital and investing in transport infrastructure need to be addressed to ensure sustainable competitiveness in the tourism sector.

Moreover, in reviving tourism, Thailand should pay attention to making it green so that it can preserve the natural biodiversity for longer. The government should issue essential policies to enhance green solutions in developing tourism technical facilities in line with specific conditions in each locality such as the application of natural energy, the use of friendly materials and waste and wastewater processing and treatment. In this vein, Bhutan provides a good example of high value, low impact tourism that can help transform the way people travel, emphasizing meaningful experiences that both enrich the individual traveler and help to safeguard cultural and natural heritage. This crisis is thus an opportunity to rethink tourism for the future.

The views expressed within this publication are solely those of the author and do not necessarily carry the endorsement of the United Nations. Views expressed reflect the author’s judgment as at the date of this publication and are subject to change.

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Thai Economy to Accelerate in 2023 as Demand from Major Economies Picks Up, Tourists Return

Addressing Flood, Drought Risk Key to Sustaining Robust Growth

BANGKOK, June 28, 2023 – Thailand's economy is projected to accelerate to 3.9 percent in 2023 from 2.6 percent last year due to stronger-than-expected demand from China, Europe, and the United States, private consumption growth, and a recovery in tourism, the World Bank said in its semi-annual Thailand Economic Monitor .

Growth in 2024 is expected to moderate to 3.6 percent and to 3.4 percent in 2025, with tourism and private consumption remaining the primary drivers of growth while external demand weakens, according to the report. Inflation is expected to moderate in 2023 to 2 percent amid easing global energy prices and price caps, although when volatile food and energy prices are stripped out, core inflation has remained higher than before the pandemic. The return of tourists, particularly from China, has strengthened the tourism outlook. Arrivals are projected to reach a greater-than-expected 28.5 million, 84 percent of the 2019 level, and to the pre-pandemic level by the second half of 2024.

Despite recent growth, risks remain tilted to the downside as weaker-than-expected global growth and political uncertainty pose key challenges to the near-term outlook. In addition, Thailand faces structural headwinds including an aging population, climate pressures, declining export competitiveness, and high household debt.

A section of the report which focuses on Coping with Floods and Droughts offers recommendations on how Thailand can better protect lives and livelihoods in a changing climate.  Like many economies in the region, Thailand is acutely vulnerable to floods and droughts and a more robust framework for effective climate adaptation will be needed to avoid the high costs associated with damages caused by floods and droughts.

"The frequency of floods and droughts, and the high human and economic cost associated with them, make climate change adaptation and water management important in Thailand,” said World Bank Country Manager for Thailand, Fabrizio Zarcone. “A more robust framework prioritizing risk mitigation planning, investing in water resources infrastructure, and managing land and water use is needed”.

Thailand currently ranks ninth globally in the INFORM Risk Index from floods, just below Vietnam, Myanmar and Cambodia. The public costs of floods and droughts are already substantial and without appropriate climate change adaptation they are likely to grow. A major flood like the devastating one that occurred in 2011 could cost more than 10 percent of GDP in lost production in 2030. Agriculture, which accounts for about 9 percent of GDP, is particularly vulnerable to water shortages, especially highly water-intensive rice production. The Greater Bangkok area, where the majority of the population resides and the largest portion of the GDP is generated, is also highly vulnerable to flood risks.

The report notes that progress has been made to better cope with floods and droughts and the Office of the National Water Resources (ONWR) since its establishment in 2017, has increasingly supported the planning and execution of flood and drought mitigation measures. Additionally, the report recommends that in line with the 2018 Water Resources Act, the remaining legal and institutional reforms should be implemented along with more robust cost-benefit assessments to prioritize suitable flood and drought prevention measures. The latest advancements to improve water use efficiency, promote a circular economy, and integrate nature-based solutions can also significantly contribute to enhancing resilience to floods and droughts.

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nationthailand

Reviving tourism sector expected to fuel 3.2% growth in Thai economy

Reviving tourism sector expected to fuel 3.2% growth in Thai economy

Thailand will witness a 3.2% GDP expansion in 2024, driven mostly by a now-flourishing tourism industry.

Thanawat Polvichai , rector of the University of the Thai Chamber of Commerce (UTCC), made this projection on Tuesday but said it does not factor in the potential impact of the government’s ambitious digital wallet scheme.

The scheme aims to distribute 10,000 baht of digital money to eligible Thais aged 16 and above within this year.

Thanawat, who is also chief adviser to the UTCC’s Centre for Economic and Business Forecasting, said the government’s economic stimulus campaign is expected to inject some 400 billion to 500 billion baht into the economy. This injection, he said, could further elevate GDP expansion to a range of 4.2% to 4.5%.

The scheme’s implementation, however, remains uncertain as it is contingent on parliamentary approval for funding through a 500-billion-baht loan act.

Reviving tourism sector expected to fuel 3.2% growth in Thai economy

UTCC’s forecasting centre predicts a 1.7% expansion in government investment and a 3.4% year-on-year growth in the private sector this year. The export and import sectors are projected to expand by 3% and 3.8%, respectively, while headline inflation will grow by 2%, up from the 1.3% forecast for 2023.

A significant contributor to the country’s positive economic outlook is the expectation of 1.48 trillion baht in income from approximately 35 million foreign arrivals.

However, the UTCC cautioned that 2024 may face potential challenges from expanding geopolitical tensions, the debt situation of Thai households and the prospect of severe drought affecting agricultural output.

UTCC’s economic forecast is similar to that from the National Economic and Social Development Council (NESDC), which was published last week. The state-run council predicted a GDP expansion in the range of 2.7% to 3.7% thanks to increasing government spending, higher public consumption and enhanced private investment.

Household debts in Thailand soar to 16 trillion baht, as NESDC urges new strategies

Household debts in Thailand soar to 16 trillion baht, as NESDC urges new strategies

Higher govt spending, export rebound expected to boost Thai GDP growth

Higher govt spending, export rebound expected to boost Thai GDP growth

PM Srettha holds talks on household debt, stimulus amid weak GDP growth

PM Srettha holds talks on household debt, stimulus amid weak GDP growth

PM underlines plans to expand GDP at FTI event

PM underlines plans to expand GDP at FTI event

UTCC cuts estimate of economic growth to 3%

UTCC cuts estimate of economic growth to 3%

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S&P Global Market Intelligence

Thailand's economy rebounds in early 2023 as tourism surges

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Executive Director and Asia-Pacific Chief Economist, S&P Global Market Intelligence

Thailand has shown a gradual economic recovery from the COVID-19 pandemic during 2022, helped by rising international tourism arrivals. Real GDP growth rose from 1.5% in 2021 to 2.6% in 2022, with growth momentum expected to improve further in 2023.

The latest S&P Global Thailand Manufacturing PMI survey results for April 2023 showed a strong upturn in manufacturing output and new orders. Due to the importance of international tourism for the Thai economy, the strong rebound in international tourism inflows evident in early 2023 signals that the tourism economy will be a key growth driver in 2023.

Thailand's economic recovery from the pandemic

The Thai economy has shown an upturn in economic growth momentum in early 2023, with first quarter GDP growth up by 2.7% year-on-year (y/y), compared with 1.4% y/y growth in the fourth quarter of 2022.

The strong first quarter growth rate was underpinned by rapid growth in private consumption, which rose by 5.4% y/y, helped by surging international tourism arrivals. Expenditure on services rose by 11.1% y/y due to buoyant spending in hotels and restaurants. However private investment grew at a modest pace of just 2.6% y/y, while public investment grew by 4.7% y/y.

Thailand's growth rate in 2022 was quite moderate in comparison with other large ASEAN economies such as Malaysia, Vietnam and Philippines, which posted very high growth rates as they rebounded from the pandemic. Thailand recorded real GDP growth of 2.6% in 2022, representing a relatively modest pace of economic recovery from the recessionary conditions caused by the COVID-19 pandemic.

A key driver for improving economic growth in 2022 was the recovery of private consumption, which grew by 6.3% compared with just 0.6% y/y growth in 2021. Private investment growth also improved from a pace of 3.0% in 2021 to 5.1% in 2022. However public investment contracted by 4.9% in 2022, while government consumption was flat.

Strong growth in private consumption and investment as well as rising energy import prices helped to boost import growth, which rose by 15.3% in 2022, while exports rose by just 5.5%, measured in USD terms. Consequently, the trade balance narrowed from USD 32.4 billion in 2021 to USD 10.8 billion in 2022.

thailand tourism sector gdp

Due to the important contribution of international tourism to Thailand's GDP, a key factor that constrained the rate of recovery of the Thai economy in 2022 was the slow pace of reopening of international tourism, although this gathered momentum in the second half of 2022.

thailand tourism sector gdp

The S&P Global Thailand Manufacturing PMI surged to 60.4 in April from 53.1 in March, signalling a rapid improvement in overall business conditions and the strongest performance in any month since the survey started in December 2015. The month-on-month increase in the headline PMI, at 7.3 points, was also by far the biggest on record (the next-largest upward movement was 4.8 points in May 2020).

thailand tourism sector gdp

A key factor driving the improvement in manufacturing operating conditions was a marked expansion in new orders during April. The rate of growth was the fastest on record and largely driven by domestic demand.

Despite rising demand for raw materials and components in April, manufacturers reported shorter suppliers' delivery times for the first time since April 2022. This reflected a wider recovery in regional and global supply chains. Price pressures eased in April, with input prices having increased at the slowest rate in three months.

thailand tourism sector gdp

Thailand's headline CPI inflation rate eased to 2.7% y/y in April 2023 compared with 5.0% y/y in January 2023 and 7.9% y/y in August 2022. The Monetary Policy Committee (MPC) of the Bank of Thailand decided to raise the policy rate by 0.25% from 1.25% to 1.50% at their Monetary Policy meeting on 25 January 2023, with a further 0.25% rate hike implemented on 29 March 2023. This follows three 25bp rate hikes by the MPC in 2022, In 2022, the Monetary Policy Committee (MPC) decided to increase the policy rate three times by 25 basis points each in August, September and November. The MPC assessed that headline inflation will likely return to the target range by mid-2023, with average CPI inflation projected to decline to 2.9% in 2023 and 2.4% in 2024.

Recovery of international tourism sector

International tourism was a key part of Thailand's GDP prior to the COVID-19 pandemic, contributing an estimated 11.5% of GDP in 2019. However, foreign tourism visits collapsed after April 2020 as many international borders worldwide were closed, including Thailand's own restrictions on foreign visitors.

As COVID-19 border restrictions were gradually relaxed in Thailand and also in many of Thailand's largest tourism source countries during 2022, international tourism showed a significant improvement during the second half of the year. The number of international tourist arrivals reached 11.15 million in 2022, compared with just 430,000 in 2021. However, the total number of visits was still far below the 2019 peak of 39.8 million, indicating considerable scope for further rapid growth in the tourism sector during 2023.

International tourism arrivals in the first quarter of 2023 surged to 6.5 million visitors, which was more than half the total number of international tourist visits in 2022. Total tourism receipts in the first quarter for both domestic and international tourism spending was estimated at 499 billion baht, up by 127% y/y. The Tourism Authority of Thailand has increased its estimated target for international tourism visits in 2023 to 25 million, which is more than double the total number of international tourism arrivals in 2022.

thailand tourism sector gdp

Thailand economic outlook

Despite the upturn in private consumption and international tourism arrivals in 2022, the overall pace of economic expansion was relatively moderate, at just 2.6%. Easing of pandemic-related travel restrictions during 2022 has also allowed a gradual reopening of domestic and international tourism travel, which gathered momentum in the second half of 2022.

With more normal conditions expected for international tourism travel in 2023, this should provide a significant boost to the economy. Due to the importance of tourism inflows from mainland China prior to the pandemic, the reopening of mainland China's international borders will be an important factor contributing to the further recovery of Thailand's tourism market.

Helped by the continued recovery of the international tourism sector, some upturn in GDP growth to a pace of around 3.4% is expected in 2023.

Over the next decade Thailand's economy is forecast to continue to grow at a steady pace, with total GDP increasing from USD 500 billion in 2022 to USD 860 billion in 2032. A key driver will be rapid growth in private consumption spending, buoyed by rapidly rising urban household incomes.

The international tourism sector will continue to be a dynamic part of Thailand economy, buoyed by rapidly rising tourism arrivals the populous Asian emerging markets, notably mainland China, India and Indonesia.

thailand tourism sector gdp

By 2036, Thailand is forecast to become one of the Asia-Pacific region's one trillion-dollar economies, joining mainland China, Japan, India, South Korea, Australia, Taiwan, Philippines and Indonesia in this grouping of the largest economies in APAC. The substantial expansion in the size of Thailand's economy is also expected to drive rapidly rising per capita GDP, from USD 6,900 in 2022 to USD 11,900 by 2032. This will help to underpin the growth of Thailand's domestic consumer market, supporting the expansion of the manufacturing and service sector industries.

However, rising per capita GDP levels will also put pressures on Thailand's competitiveness in certain segments of its manufacturing export industry. Therefore, an important policy priority for nation will be to continue to transform manufacturing export industries towards higher value-added processing in advanced manufacturing industries.

One of the key economic and social challenges facing Thailand is its rapidly ageing population, which will result in a rising burden of health care and social welfare costs over the next two decades. This will be a drag on Thailand's long-term potential growth rate, making investment in technology and innovation increasingly important to mitigate the economic impact of demographic ageing.

Rajiv Biswas, Asia Pacific Chief Economist, S&P Global Market Intelligence

[email protected]

© 2023, S&P Global Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.

Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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Thailand's employment rises in Q4 on increased tourism

Sunday, 10 Mar 2024

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BANGKOK (Reuters): Thailand's employment rose 1.7% in the final quarter of 2023 from a year earlier, helped by the tourism sector, after a 1.3% year-on-year increase in the previous quarter, the state planning agency had announced.

Jobs in the hotel and restaurant sector rose 8% annually in the final quarter of 2023 as the number of tourists increased, the National Economic and Social Development Council said in a statement.

The jobless rate dropped to 0.81% in the October-December period versus 0.99% in the prior three months, the agency said.

Thailand's definition of unemployment is narrow, however, and counts as jobless those who do not work a single hour in a surveyed week. Analysts say the figures do not catch Thailand's significant unofficial economy.

In the fourth quarter of 2023, Thailand had a workforce of 40.7 million, up from 40.5 million in the prior quarter, the planning agency said.

(Reporting by Orathai Sriring and Kitiphong Thaichareon; Editing by Kim Coghill, Kanupriya Kapoor) - Reuters

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September 2023

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One Thai baht equals 0.028 U.S. dollars and 0.026 euros as of September 2023. The figures have been rounded.

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Statistics on " Tourism industry in Thailand "

  • Value of tourism GDP Thailand 2017-2021
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  • Share of foreign visitors to total guests of accommodations Thailand 2015-2022
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Economic impact

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Accommodation

  • Premium Statistic Share of foreign visitors to total guests of accommodations Thailand 2015-2022
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Tourist perspectives

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Experts split on PM's hub dream

Observers urge govt to focus on root causes of the nation's problems

PUBLISHED : 4 Mar 2024 at 06:22

WRITER: Mongkol Bangprapa

Prime Minister Srettha Thavisin announces his vision for Thailand at Government House last month. (Photo: Chanat Katanyu)

Prime Minister Srettha Thavisin announced his vision for Thailand's future recently. Dubbed "Ignite Thailand", the plan seeks to establish the country as the world-class hub for eight sectors, namely tourism, medical and wellness tourism, food and agriculture, aviation, logistics, future mobility, digital economy, as well as finance.

The vision was lauded by economic analysts, who said the government should continue to develop the nation's potential, and the plan could lead the way towards a more sustainable way out of the current economic slump.

According to Nonarit Bisonyabut, senior economic researcher at Thailand Development Research Institute (TDRI), developing the country into a regional hub for businesses and industries can help Thailand escape the middle-income trap.

"Thailand should find a way to general revenues in a more sustainable manner, as the country's main problem is low economic growth," he said.

SET PRIORITIES

He urged state agencies to identify which areas need urgent attention, so officials can focus their efforts on the problems and direct resources more effectively.

"The budget for soft power promotion, for instance, will never be enough, as long as the government spends it only on organising events," he explained, urging the government to spend its budget more wisely.

For instance, the government might want to consider sparing part of the 500-billion-baht budget for the digital wallet scheme to help address some of the structural issues within the economy.

"If the government wants to promote the country as the logistic hub, it should forget the Land Bridge megaproject. It would save up several billion baht, which could be used to solve border issues and address weaknesses in our regulations," he added.

"We are already number 1 in the region in terms of tourism. As a wellness and medical hub, we are also price-competitive with Singapore, especially in surgery and childbirth.

"With our rich food culture and our status as a food exporter, Thailand could very well become a regional hub for agriculture and food -- we just need to focus on maintaining the quality," he said.

PROBLEMS AND POTENTIAL

The researcher, however, pointed out the challenges faced by the other five industries.

Mr Nonarit said the opportunity to develop the country's potential as an aviation hub is gradually narrowing because of the stiff competition in the region.

The government planned to develop aircraft maintenance depots in U-tapao and Chiang Rai-Mae Fah Luang airports, but construction has been beset by delays since the Covid-19 pandemic.

Thailand is well-positioned to be a logistics hub because of its location at the centre of the Cambodia-Laos-Myanmar-Vietnam region, which is expected to grow rapidly in the next few years, but plans for a cross-country connection would only be viable as long as they linked to either India or China on one end.

"If we can connect to India and southern China, it would be a great advantage because there is a lot of demand," he said.

However, the government is choosing to go with the Land Bridge mega-project, which Mr Nonarit said won't significantly reduce transit times like the Panama Canal and Egypt's Suez Canal.

Thailand also has the potential to become the future hub for foreign investment, he said, especially as China is facing numerous geopolitical problems.

In order to become a digital economy hub, the government should ask itself, whether or not it is ready to develop the country into a digital special economic zone, and really focus on start-up businesses.

While it is impossible for Thailand to compete with Hong Kong and Singapore as a global financial hub in the next couple of years, the country can still be a hub for regional investments, especially for companies and projects based in the CLMV region, he said.

Given those limitations, he urged the government to concentrate on its areas of expertise, namely tourism and food.

thailand tourism sector gdp

Nonarit: Govt needs to focus

Isares Rattanadilok Na Phuket, vice-chairman of the Federation of Thai Industries (FTI), said he was delighted to hear the government is finally concentrating on the key issue affecting the country.

"I want to see the government work with the private sector, the way the Joint Public and Private Sector Consultative Committee (JPPSCC) did, to ensure every effort goes in the same direction," said Mr Isares.

If the government has set a clear direction, the private sector will then be able to help the country to compete with its neighbouring countries, Mr Isares said. "I think the government is starting to see the country must have better infrastructure to accommodate both tourists and advanced industries," he said.

Improvements to the country's railway system can improve connections to Laos via Thanaleng railway station, and onwards to southern China and beyond. However, private companies are often deterred from investing due to the abundance of red-tape. As such, he urged the government ease the regulations to facilitate private sector involvement. "The advantage of this government is that the prime minister came from the private sector, so he understands what it wants," he added.

thailand tourism sector gdp

Isares: Time to set clear goals

On the other hand, Varakorn Samakoses, economic and finance expert and president of Dhurakij Pundit University, disagreed with the hub development plan saying the concept of hubs is old-fashioned.

The hub development plan has been talked about for a long time, he said, adding the world today is more advanced than that. "It might be the dream of the premier alone. I think the government should focus on short-term policies that are more suited to more current problems, before committing to hub development processes for another 20–30 years," said Mr Varakorn. "The premier has a dream that he wants to make true, but his method is not based on reality. We barely hear other countries talk about hubs in this era."

Thailand, he said, has a lot of short-term problems that need to be fixed, that's why the government should review the plan to develop the eight hubs to see if it still lines up with the national development strategy. "However, in these 2–3 years, the most important is to learn how to spend the budget efficiently and boost the quality of human resources," Mr Varakorn added.

thailand tourism sector gdp

Varakorn: Hub dream outdated

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Hospitality industry takes centre stage

The Commerce Ministry aims to position Thailand as the epicentre of the hotel, restaurant and catering (HoReCa) industry in Asia.

After presiding over the opening ceremony of THAIFEX-HOREC ASIA 2024, Commerce Minister Phumtham Wechayachai said the trade show should open new business avenues for entrepreneurs in the HoReCa sector to elevate their business to the next level through intelligent technologies, innovations and local wisdom.

He said he believes following the success of THAIFEX - ANUGA ASIA, the current event will pave the way for Thailand to become a hub for the HoReCa industry in Asia.

Mr Phumtham said Thailand faces economic problems which require stimulus to sustain growth.

He said this HoReCa trade show is crucial in supporting the needs of the tourism industry, in line with Prime Minister Srettha Thavisin's vision of promoting Thailand as a tourism hub based on its strength in hospitality and service.

Moreover, this event will help the tourism industry meet its full potential, said Mr Phumtham.

He said Thailand is the eighth-most popular tourist destination in the world, thanks to its vibrant culture, mouthwatering food and breathtaking landscapes.

Tourism revenue tallied 2.3 trillion baht in 2023, representing 70% of the annual expenditure budget.

"According to Business Development Department data, there are 11,540 hotel and resort operators, 21,695 restaurant operators, and 606 catering businesses, whose establishments continue to increase. From such substantial potential and strengths in hospitality, the Commerce Ministry aims to position Thailand to be the hub of HoReCa businesses in Asia," Mr Phumtham said.

Held for the first time by the Department of International Trade Promotion, the Thai Chamber of Commerce and Koelnmesse, the trade show will showcase over 300 companies from 23 countries, including Thailand, cover 27,000 square metres, and feature nine HoReCa segments: Bakery and Ice Cream, Café and Bar, Cleaning and Laundry, Dining, Furnishing, Kitchen, Services, Tech, and Wellness.

With the event expected to draw 20,000 buyers and visitors worldwide, it will provide an opportunity for business owners and hospitality industry professionals to display their innovations, creative designs, and products which enhance international marketing opportunities.

THAIFEX - HORECA Asia 2024 got underway yesterday and continues through March 8. It opens from 10am to 6pm at Halls 9-12, Impact Exhibition Center, Impact Muang Thong Thani.

Thai business group maintains 2024 growth forecast at 2.8%-3.3%

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