The Organisation for Economic Co-operation and Development (OECD) warns that Thailand will face “a severe recession” this year, with the country’s GDP expected to shrink by 6.9 per cent before bouncing back in 2021.
OECD released its first Economic Assessment of Thailand on Monday (5 Oct) stating that the COVID-19 pandemic has “severely” hit the country’s economic activities, and its growth is expected to be negative this year.
“Thailand made impressive economic and social progress over the past decades, thanks to its strong policy framework, friendly business climate, and attention to citizens’ well-being.
“However, the COVID-19 crisis has interrupted this progress, and a severe recession will occur in 2020, like in most other countries,” it stated.
According to OECD’s assessment, the country’s GDP will shrink by 6.9 per cent this year and is expected to bounce by 3.5 per cent in 2021.
The shrink in GDP is said to result from the lockdown measures that have severely domestic demand and tourism particularly.
Meanwhile, Thailand’s inflation [Consumer Price Index] has plummeted by 1.1 per cent this year due to low energy prices and weak demand.
“The Bank of Thailand has reacted quickly, cutting its policy rate to a record low level. If downside risks materialise, the Bank could ease its monetary stance further,” said OECD.
“The use of additional policy tools should also be considered if space to lower its policy rate becomes insufficient.”
OECD warned that low oil prices risk “undermining efforts to mitigate climate change during the post-COVID recovery”, adding that investments in renewables energy capacity potentially be key levers for a sustainable economic recovery.
However, the economic recovery is expected to be “slow”.
OECD noted that Thailand will require more policy reforms which focused on productivity growth and human capital accumulation in order to achieve a high-income country.