BANGKOK -- Thailand recorded its sharpest economic contraction in over eight years, with gross domestic product falling 1.8% on the year in January to March, the country's economic planning agency said Monday.
The kingdom has re-opened shopping malls closed for nearly two months due to the coronavirus outbreak as it tries to pick itself up off the floor.
The National Economic and Social Development Council said Southeast Asia's second-largest economy shrank at its fastest pace since the fourth quarter of 2011, when Thailand was hit by massive flooding.
It was the first decline in quarterly economic output since the first quarter of 2014, just before the military, led by Gen. Prayuth Chan-ocha, now prime minister, launched a coup in May of that year.
Falls in exports and private investment were the main reasons for the latest contraction. Private consumption also slowed. Exports shrank by 6.7% compared with the same period last year. Private investment fell 5.5%. Growth in private consumption slowed to 3.0%, year-on-year, down from 4.1% the previous quarter.
The novel coronavirus outbreak began to bite in February, with the country's vital tourism industry taking a huge hit. According to the Ministry of Tourism and Sports, Thailand recorded 2.5% growth in tourist arrivals in January, year-on-year. But they were down 43.5% in February and 76.1% in March. Spending by nonresidents is counted as exports of services. External income from services plummeted 29.8% versus the same period the previous year.
The pandemic has also prompted fears of falling demand among companies, leading them to halt investment. Construction of industrial plants fell 18.1% on the year. Residential construction also shrank 6.7%.
Clusters of infection began showing up in Thailand in mid-March. Local and central-government authorities responded with curfews, travel restrictions, a ban on alcohol sales a and soft lockdown to contain the spread of the virus. That, in turn, spawned business closures and further weighed on consumer spending.
The epidemic now appears to be under control. Twice in the past week, there were reports of no new COVID-19 patients.
The lockdown measures are being eased. Now in phase two of a four step process, shopping malls, department stores, foot massage salons, botanical gardens, museums, and libraries have been reopened.
Many Thais and expatriates flocked to shopping malls on Sunday for the first time in nearly two months. The Ikea furniture store at the Mega Bangna shopping mall in eastern Bangkok drew a long line of customers. Kinokuniya, a Japanese-owned international bookstore, also had 20 to 30 people waiting outside its shop at Central World shopping mall in central Bangkok. Only 60 people were allowed into the shop at a time to allow social distancing. People waiting in line also kept well apart.
Things have not returned to normal, however. Some shops and restaurants remained closed at Central World. And there were fewer customers than on a typical weekend before the COVID-19 pandemic.
Since early April, the Civil Aviation Authority of Thailand has barred international flights into the country, virtually halting tourism from abroad. The ban had been set to expire May 31, but the authority has extended it until June 30.
According to the Bank of Thailand, the country's central bank, the Business Confidence Index of Thailand fell to its lowest level in April since the index was first published in 1999. Sagging business confidence has led to fears of lost jobs and income among citizens, causing them to tighten their purse strings.
The government has pushed through measures aimed at keeping business afloat. Cash handouts of 5,000 baht ($156) a month to informal workers are among the steps aimed at directly lifting private consumption.
Recovery is likely to be gradual. Don Nakornthab, senior director at the Bank of Thailand's economic and policy department, in April predicted the economy will contract every quarter this year, bottoming out in the second quarter.
The National Economic and Social Development Council forecasts a contraction of 5.0% to 6.0% in 2020, a major downward revision from its previous outlook in February for 1.5% to 2.5% growth this year. If the economy stays on its current trajectory, 2020 will be the worst year for Thailand since the Asian financial crisis.
The Bank of Thailand will hold a monetary policy committee meeting Wednesday to discuss further easing to support the economy. The central bank has cut its policy rate twice since the beginning of the year.