Recently the International Monetary Fund (IMF) concluded their assessment of the Thai economy today and tomorrow. In spite of the recent COVID-19 wave and its impact, Thailand should still grow by 2.6% this year and 5.6% next.

The Thai economy is showing incipient signs of recovery from the COVID-19 downturn, owing in part to a multi-pronged policy package of fiscal, monetary, and financial policies. After the economic contraction of 9.4 percent q/q in 2020:Q2, far exceeding the fall during the Global Financial Crisis (GFC), real GDP, buttressed by policy support, rebounded in the second half of 2020 limiting the overall GDP decline for the year to 6.1 percent. Weak domestic demand, coupled with a subdued global economy, contributed to both weak headline and core inflation throughout the year. The current account (CA) surplus narrowed from 7 percent of GDP in 2019 to 3.2 percent of GDP in 2020, largely reflecting the collapse in tourism receipts.

The economic recovery is expected to be sluggish, uneven, and subject to heightened uncertainty. Real GDP is projected to expand by 2.6 percent in 2021, led by a gradual recovery in domestic demand and goods exports. The drag on tourism is expected to continue for most of 2021 due to uncertainty around vaccine rollouts and full resumption of global travel. The economy is projected to rebound by 5.6 percent in 2022 supported by an acceleration in tourism and continued strength in the global recovery. Headline inflation is forecast to recover somewhat in 2021, buoyed by the recovery in oil prices, while core inflation would likely show some inertia given the continued sizable slack in the economy. With recovering domestic demand pushing up imports and the continued weaknesses in tourism, the CA surplus is projected to decline further to about 0.5 percent of GDP in 2021 and slowly recover to around 3−31⁄2 percent of GDP through the medium term as tourism strengthens.

The uncertainty surrounding the growth outlook is nevertheless larger than usual. While a faster distribution of an effectivevaccine is a positive risk, the unknown path of the pandemic and potential bottlenecks on vaccination plans could challenge the pace of the recovery. A prolonged pandemic could amplify vulnerabilities in the nonfinancial corporate sector raising the risk of scarring. Both distributional and long-term scarring risks also loom large.