Thailand’s economy was severely impacted by the COVID-19 pandemic and is estimated to have shrunk by 6.5 percent in 2020. Growth is projected to expand by 4.0 percent in 2021, according to Restoring Incomes; Recovering Jobs, the latest edition of the World Bank’s Thailand Economic Monitor,” launched today. The report stresses that sustained recovery in employment will be essential to helping the country bounce back in 2021 and 2022.
In 2020, weak global demand, the sharp decline in international tourist arrivals, and domestic mobility restrictions depressed goods and services exports and private consumption. Exports and private investment are estimated to have declined by 18.5 percent and 4.4 percent respectively, while household consumption declined by 1.3 percent.
The resulting declines in income have created economic hardship for many, though the Government has made good progress in implementing a substantial package of measures to support households and firms. Nevertheless, projections indicate that an additional 1.5 million people may have entered poverty in 2020 due to the economic impacts of COVID-19, based on a poverty line of US$5.50 (2011 PPP) per day.
This year, the economy is expected to recover gradually, despite the recent second outbreak of COVID-19, and growth is forecast to pick up further to 4.7 percent in 2022. However, the recovery remains vulnerable to downside risks, including from an extended resurgence of the pandemic resulting in a prolonged stagnation in tourism and domestic activity, a weaker-than-expected global recovery that could lead to continuing trade and supply chain disruptions, and high household debt levels.
The pandemic’s impact has had a significant impact on Thailand’s labor market, with a particularly large increase in unemployment among young people. Hours worked fell, as did monthly incomes. Hours worked have not fully recovered, and employment in several sectors including manufacturing remains smaller than a year ago. This means the labor market is in a vulnerable position to confront any future shocks including a resurgence of COVID-19.
“The COVID-19 crisis and its economic impact have highlighted a key vulnerability for Thailand: the declining number of working-aged people, which compounds the challenge of recovering the economic losses of the last year,” said Birgit Hansl, World Bank Country Manager for Thailand. “Improvements in employment, productivity and labor incomes, especially among the poor, will be necessary for a sustainable recovery.”
The report recommends that in the short term, the government put in place training programs to improve workers skills and provide financial support while they get back to work. Ongoing efforts are required to ensure that education and training matches the needs of employers.
In the longer term, the government can increase employment in the care sector, make childcare more accessible and decrease its cost to help increase female labor force employment. The report also recommends increasing the retirement age and putting in place performance-based compensation schemes and flexible working arrangements to extend the working lives of older people.
“The decline in the working age population will reduce labor supply and economic output over the coming decades. Good jobs will need to be created in high-productivity sectors associated with Thailand’s emerging knowledge economy. Policies to boost labor productivity and labor market participation of older people and women can help promote a sustainable recovery from COVID-19, while addressing challenges associated with an aging population,” according to Kiatipong Ariyapruchya, World Bank Senior Economist for Thailand.