Thailand post-pandemic and beyond 

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Pattaya, Thailand 28 April 2022 – Tractus Asia Limited’s Executive Director and Co-Founder Dennis J. Meseroll was the keynote speaker at the monthly Eastern Seaboard Business Dinner event. Mr. Meseroll gave an overview of the Thai economy post-pandemic and a summary of the forecasts for key economic indicators into 2023 and implications for the economy.

Highlights

  • The devastation in leisure and medical tourism export revenues was offset by strong manufactured exports as well as the agricultural production.
  • Global uncertainties (inflation, supply chain disruptions and labor supply) and the unstable state of international relationships are threatening the economic growth.
  • Thai government intervention through monetary policy and fiscal price controls is critical to stabilizing the economy short-term.

Thailand was presented in the context of the global economy because of the country’s strong dependency on income from external trade. The prospects of the global economy are a significant leading indicator of the health of the Thai economy in 2022 and beyond – and these prospects have dimmed significantly. Mr. Meseroll noted that in April the IMF revised its forecasts for global Gross Domestic Product (GDP) growth down from 6.1% in 2021 to 3.6% in both 2022 and 2023. With foreign direct investment remaining an option, it is still unreliable for Thai industry gross domestic product. Further decline, however, is not expected.

“Forecasts for 2022 range from a low of 3 million to a high of 5.6 million, but much will depend on Thailand completely removing pre- and post-travel testing and documentation requirements”

Over 70% of Thailand’s economy and sustainable growth following the Asian financial crisis is dependent on exports, including services, such as foreign leisure and medical tourism, and tourism revenues of all types of account for over 20% of GDP. Thailand’s pandemic response measures, which included significant quarantine requirements for foreign travelers wanting to enter the country, decimated both leisure and medical tourism in 2020 and 2021, pulling the economy into recession in 2020 and almost in 2021. Foreign tourist arrivals declined from 39 million in 2019 to about 400,000 in 2020 and only rose to 750,000 in 2021. Forecasts for 2022 range from a low of 3 million to a high of 5.6 million, but much will depend on Thailand completely removing pre- and post-travel testing and documentation requirements as well as the state of the global economy. Likewise, medical tourists fell from a high of 3.6 million, representing US$1.8 billion in revenue for the private hospital sector in 2019 to essentially zero in 2020 and 2021, pulling many private hospitals into the red for the last two years.

Thanks to a diversified economy, the devastation in leisure and medical tourism revenues was offset somewhat by relatively strong manufactured exports which grew by 16.2% in 2021 creating a trade surplus for the first time in many years, growing by 3.4%, as well as the agriculture industry which also grew by 1.4%. These positive results in the real economy combined with US$34 billion in cash (equivalent to about US$485 per person) the government injected into the economy through hundreds of support programs helped to push the economy into growth of +1.6% in 2021. This is not a rapid growth, but it can be sustained on this trajectory and is positive for the gross domestic product (GDP). Employment and education both benefit from a strong economic position.

Mr. Meseroll pointed out that the future is clouded by an explosion of uncertainty, including:

  • higher commodity price inflation (driven by both demand as well as supply);
  • supply chain disruptions;
  • continued COVID-19 impacts – particularly in the People’s Republic of China;
  • supply chain transportation disruptions exacerbating manufacturing capacity constraints;
  • the war in Ukraine;
  • and more recently in the developed world and a longer-term trend in developing markets, shortages in the availability of talent.

The Thai government has implemented regulations to contain input price inflation through subsidies on the price of transportation fuel, and controls on farm gate and retail prices for basic foodstuffs. Mr. Meseroll noted that, “the government has recently increased their debt limit to 70% of GDP which will allow them to borrow another US$20 billion in dry powder to prime domestic consumption, hobbled by high levels of personal debt, which has increased from about 80% of income to over 93% as of the end of 2021”. Without this government intervention (both monetary policy and fiscal price controls), Mr. Meseroll noted, as well as good fortune that global economic growth will meet or exceed World Bank forecasts, Thailand will have a difficult time meeting its own growth forecasts of 3.0-4.0% for 2022.

Whether 2022 meets these expectations for economic growth will be dependent on the balance of factors driving it:

  • exports of goods and services (leisure and medical tourism);
  • government spending for on-going infrastructure development projects;
  • government transfer payments and price controls to tame inflation which will pull down price inflation and supply chain disruption from various international disruptions.

Only time will tell whether this balance will tip in Thailand’s favor this fiscal year or the next, but it is critical for companies based in Thailand to prepare how they will react to these uncertainties to mitigate business disruption.  


About the Eastern Seaboard Business Dinner

Created 20 years ago, the Eastern Seaboard Business Dinner is a monthly event that takes place in a unique and relaxed environment. It brings together business leaders from various backgrounds including Automotive, Manufacturing, Real Estate, Legal, Consulting, etc. to present an industry topic relevant to business operations in Thailand


About Tractus 

Tractus has been assisting companies to make informed decisions about where to invest and how to expand their business in Asia and beyond for over 25 years. Our partners and senior management leverage their experience running successful manufacturing and service businesses, bringing this commercial perspective to our client work. We have proven experience advising companies on developing and executing their investment strategies in complex situations and in times of uncertainty. From undertaking detailed financial feasibility analyses, identifying acquisition targets and negotiating complex M&A transactions to developing a location strategy and identifying the optimal sites to support their company’s growth in Thailand and beyond. Let us show you how we can support you to make your business a success.


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