23 May 2024

The tourism industry is showing initial signs of recovery, but Thailand’s small businesses and households are still struggling to survive as uncertainty about COVID-19 gnaws at the local and global economy.

After Thailand reopened its doors on November 1 to fully vaccinated tourists, the number of arrivals has seen a steady, sharp increase.

The number of new arrivals between November 1 and 16 rose to 58,870, according to the Centre for COVID-19 Situation Administration.

“The numbers are encouraging,” said Charl Kengchon, executive chairman at Kasikorn Research Centre.

He hoped that Thailand would receive about 100,000 tourists a month in the initial stages of the country’s reopening.

More tourists expected

The state-run think-tank, the National Economic and Social Development Council (NESDC), on November 15 estimated 257,000 foreign tourist arrivals this year and 5 million next year, compared to 6.7 million last year when Thailand was hit by the pandemic. 

“The NESDC’s forecast may be right as we welcomed close to 40 million tourists in 2019 before the pandemic,” said Charl.

A plan to reopen the world famous Maya Bay beach in January next year is expected to boost the number of tourists.

Maya Bay, located in southern Thailand, has been closed to tourists since 2018 due to a natural rehabilitation project after being damaged by overuse. The government, however, will limit the number of visitors to the bay to around 2,000 a day, down to less than a third of the average 7,000 people a day previously, according to Thon Thamrongnawasawat, an adviser to the Department of National Parks.

“The Thai economy relies heavily on tourism, so its recovery will drive economic revival,” said Charl.

Revenue generated from tourism accounted for as much as 20 percent of gross domestic product (GDP) in the pre-pandemic period.

Revenue from spending by foreign and local tourists amounted to Bt1.9 trillion and Bt1.1 trillion respectively in 2019, according to the Tourism and Sports Ministry.

China’s policy a key factor

The number of tourists visiting Thailand this year and in 2022 is also dependent on the policy of the Chinese government, on whether it will allow its citizens to travel abroad. Chinese visitors were the biggest chunk of Thailand’s tourist market before the pandemic.

“Since Thailand reopened its doors, the number of new arrivals has remained low because people from China are not traveling overseas yet,” said Danucha Pichayanan, secretary-general of the NESDC.

The surge in new COVID-19 cases in Europe may also adversely affect Thailand’s tourism this year and in 2022, Charl said.

Local tourists are expected to make 66.7 million trips this year, down 26.3 percent from last year, but exponentially higher than the 3.8 million trips in the first nine months of this year. The trips are expected to encourage spending estimated at 296.9 billion, according to Kasikorn Research. Trips by local tourists are expected to jump to 109-155 million next year, with an estimated economic value of Bt698 billion.

The number of new COVID-19 cases stabilizing at around 6,000-7,000 a day is a positive for the economy, Charl said, adding the high rate of vaccination is also an encouraging factor.

Shortage of migrant labor

As Thailand has reopened the country, large numbers of migrants from neighboring countries have illegally crossed the borders to find work.

Local businesses, especially construction, restaurants and food stalls, and other related tourism services, are complaining of a shortage of 400,000 laborers. They have urged the government to allow the return of migrant workers. The labor shortage suggests a failure of the government to make adequate preparations before reopening the country.

“The Thai bureaucracy has failed to facilitate the return of migrant laborers, while demand for labor is high due to the country reopening,” said Lae Dilokvidhyarat, a labor economist at Chulalongkorn University.

“While more tourists are visiting the country, restaurants face a labor shortage. This will prevent the tourism industry from making a fast recovery,” he warned, questioning the government’s ability to manage labor issues.

MoU on migrant labor

Labour Minister Suchart Chomklin has assured that migrant laborers would be allowed entry next month. He aims to sign memoranda of understanding (MoU) with neighboring countries.

Lae, however, is worried that though the MoU would solve a short-term issue, the government needed to look at the longer term in order to manage migrant labor efficiently.

“Both Thailand and labor export countries have inefficient bureaucracy systems that impose high entry costs on workers [Bt26,000 each]. This is unfair to them [the laborers],” he said.

Among ASEAN governments, only Singapore is efficient in managing migrant labor, and Thailand should learn from them, said Lae.

“The government should allow free flow of labor and make employers responsible for their workers’ healthcare and virus protection,” he suggested.

Meanwhile, the challenge for Thai workers is how they can catch up with new technology when they return to the labor market.

Many factories have installed new machines or robots to cope with the impact of the pandemic, so it is not clear whether Thai workers could work with the new machines, said Lae. As industry evolves, workers need to constantly learn new technology, he added.

Consumers still struggling 

The NESDC has forecast private consumption to expand 1.2 percent this year, up from the 1 percent contraction last year. The expansion remains slow compared with the 4 percent growth in 2019. The think-tank is optimistic that consumption will grow 4.3 percent next year.

However, high household debt has become a serious problem and an impediment for private consumption. Household debt stood at Bt14.3 trillion, equivalent to 89.3 percent of GDP, the highest debt-to-GDP ratio among developing countries, says the SCB Economic Intelligence Centre. It predicts that debt will rise to 90-92 percent of GDP by the year-end.

According to a World Bank survey published this month, 70 percent of respondent households faced a decline in their income since March last year, while about 80 percent of households benefited from the government’s relief measures implemented since last year.

About 50 percent of respondents said they suffered from unemployment, furloughs, cuts in working hours, or decline in income.

Central bank steps in

To further tackle the debt issue, the Bank of Thailand (BOT) last week announced new measures to support debtors.

The BOT expanded the coverage of the debt clinic project to include people whose debt had become non-performing loans before October 1, expanding from the previous deadline of February 1.

Debtors will be assisted in restructuring their debts to reduce their burden, and some can have their interest rate cut by 1-2 percent annually. As of the end of October, 22,011 debtors had participated in the debt clinic with combined loans of Bt5.2 billion, according to the BOT.

SMEs in battle for survival 

Nae Fuanglikhit, chief executive officer and founder of WANDN Media, which makes advertising films and is a film shooting contractor, bemoaned that some clients were delaying their contracts to next year due to pandemic concerns.

“Each province has its own set of rules regarding containing the pandemic and most provinces have not lifted restrictions,” he said.

During the pandemic, Nae had to fight to survive by providing live streaming services and producing computer graphics and short animation films.

Acknowledging that many small businesses faced difficulty in accessing bank loans, the government assigned state-run banks to support them. The so-called specialized financial institutions, such as Government Savings Bank (GSB), Small and Medium Enterprise Development Bank of Thailand and Krungthai Bank, last week announced new lending packages to support small businesses. For example, GSB offered SMEs loans up to Bt20 million each at 2.99 percent interest rate for the first two years of a 10-year term loan.

With some positive signs visible after the country’s reopening and the large expansion of agricultural production in the third quarter, Kasikorn Research might raise this year’s GDP growth forecast for the year from the current 0.2 percent, but not as high as the 1.2 percent growth forecast by the NESDC, added Charl.

By Thai PBS World’s Business Desk