The Thai economy in the third quarter of 2020 contracted at a better-than-market-expected rate of -8.0% YoY as economic activities recovered, partly due to a smaller-than-expected contraction in exports from pent-up demand after the easing of lockdown measures in Thailand and many other countries. Meanwhile, government spending in both consumption and investment grew more than expected. Although the third quarter was a transitional period following the end of government relief measures under the “Stronger Together” program which saw cash handouts of THB5,000 distributed to those in need for three consecutive months during 2Q20, household spending has improved significantly since the 2Q2020, reflecting the support from pent-up demand after the easing of lockdown measures.
The Thai economy in 4Q20 is expected to contract at a rate almost on par with that of the third quarter, supported by government measures to encourage household spending. KResearch projects that Thailand’s overall economy in 2020 will shrink by at least 7.0%. The trend of Thai economic recovery in 2021 is still set to encounter a myriad of uncertainties, including the impact of the still uncontrollable pandemic on global economic recovery, and the restriction on plans to reopen the country to foreign tourists next year. On the other hand, the trend of Baht appreciation will affect export revenues, and such factors affecting income from overseas will in turn impact employment, household spending and the credit quality of the financial system. Furthermore, political uncertainty will continue to be another pressing issue into 2021.
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