Public intervention does not seem to be enough to rescue the national economy from the pandemic
“A perfect storm is engulfing Thailand’s baht and the one group of people who can save it are stuck in lockdown, thousands of kilometers from the arrivals lounges of Bangkok, Phuket and Chiang Mai.” A un articolo di Bloomberg article opens in these terms, noticing how the absence of tourists in Thailand translated into a depreciation of the national currency. Indeed according to the author, baht is currently the worst performing currency in Asian emerging markets. Several factors contributed to this decline: deficit in the balance of payments, the contextual increase of the dollar and the seasonal repatriation of dividends by Japanese investors. But the dire outlook on tourism is the real weak link in the national recovery.
In general, emerging economies of Southeast Asia are deeply embedded in the webs of globalization, which is why the consequences of the Covid-19 crisis were quickly transmitted from one country to another. The entire region based its economic growth on exports, attraction of foreign direct investments and global value chains - hardly hit by the pandemic. The contraction in global trade has strongly affected the economic stability of these countries, even though ASEAN maintained positive growth rates in 2020. In short, the picture is not the brightest: a series of systemic contributing causes afflict the region.
As argued by Victoria Kwakwa, Vice President of the World Bank for East Asia and the Pacific, political and health performances of ASEAN countries are commendable, but this is not enough for countries that heavily rely on the one sector that cannot be digitized: tourism.
ASEAN has pledged to do everything in its power to remedy the situation. It promoted the Development Framework, the 2020-2030 Work Plan and the White Paper for the implementation of intra-regional and international tourism. But in 2019 in Thailand tourism-driven services contributed to the 62% balance of payments surplus, and the situation has dramatically worsened since then. The current account deficit recorded in the first quarter of 2021 overwhelmed the Thai baht, which fell by 3% in March. According to economist Prakash Sakpal, an Asia’s expert, the current deficit of $ 1.7 billion in the first two months of 2021 compared with the surplus of $ 8.8 billion in the same months of 2020 clearly describes the situation. The Bank of Thailand hoped that a depreciation could have revived the economy, making Thai exports more competitive and favoring tourism. However, while most ASEAN countries have experienced a vigorous recovery in exports since mid-2020, Thailand has maintained a negative trend, declining 1.2% year-on-year in February last year.
According to Forbes, the country hopes that easing restrictions on intra-regional tourism will encourage people to travel more. The Center for Economic Situation Administration is considering welcoming vaccinated visitors without quarantining them for some destinations, starting in July 2021. However, different variants of Covid-19 could further slow the recovery of tourism, and perhaps the recovery for the whole country will be slower than expected. A rapid distribution of vaccines is crucial in this sense, especially with regard to international tourism - which is why the slowness of Europe, the third country of origin of tourists visiting Thailand after East Asia and Southeast Asia, does not bode well.