Thailand was amongst the first countries with coronavirus infections outside of China. This did not come as a surprise as the country sees a large number of Chinese tourists every year. They account for 28% of all foreign visitors. And Thailand relies heavily on the tourism industry – it makes up a fifth of the country’s GDP. Research firm GlobalData estimates that Thailand – like other countries in the region that rely on tourism – is likely to lose US$3-6 billion in tourism-related revenue due to the coronavirus.
Popular tourist destinations are already feeling the direct effect of the coronavirus. In Phuket for example, about 1,000 people lost their jobs between Jan 26 and Feb 20, the Provincial Employment Office reported. All used to work in the hospitality industry according to the officials.
To mitigate the economic consequences of the coronavirus, Thailand’s central bank cut its policy rate to a record low of 1% earlier this month. And Thailand’s Finance Ministry lowered its gross domestic product growth outlook for 2020 from 3.3% to 2.8%. The National Economic and Social Development Council forecasts an even worse scenario: “If the coronavirus epidemic lasts until June, Thailand’s economic growth could fall to a mere 1.5% in 2020.”
Thailand economy – where is it going?
Southeast Asia’s second-largest economy was already unwell before the outbreak of coronavirus. In 2019, the Thai economy grew by 2.4%, which is the slowest growth since 2014. One reason for the economic slowdown was the strong Thai baht. It rose by over 7% against the euro last year, marking a stronger growth than any other Asian currency. It was also up by almost 3% against the US dollar.
However, the Thai baht began to weaken against leading international currencies early this year. The baht weakened by about 5% against the US dollar, and 4% against the euro. This is another result of the coronavirus putting pressure on the market. Chinese tourists account for almost 3% of Thailand’s economic output.
Furthermore, the global economic slowdown has hurt Thailand’s exports. Last year, exports from Thailand declined 2.65%. However, in January, exports were unexpectedly up by 3.35% compared to data from 12 months earlier from the Ministry of Commerce. This is the first rise in six months, mainly due to oil and gold exports. And the positive sentiment from the Phase-1 trade deal between the U.S. and China again expanded exports of products related to those tariff measures.
Young graduates facing unemployment
The Thai economy is also facing pressure from the high unemployment rates among youth. About 11% of the country’s youth have no jobs, are not in school, and have no marketable skills, according to one survey. This represents over one million young people. And this unqualified population is growing at a rate of 1.16% per year. Furthermore, half of new graduates are likely to go jobless according to the Ministry of Higher Education, Science, Research and Innovation. A study in March found that by the end of next term, the number of unemployed young graduates will rise to more than 500,000.
For an aging society with a critical labour shortage ahead, this is bad news. However, the government has begun taking measures to deal with the latter problem. The ministry of education has launched an 8.6 billion baht “Youth Build the Nation” program, that provides paid volunteer jobs to unemployed graduates.