Asia Travel Re: Set – Issue #70: In Summary

Asia Travel Re:Set issue 70 cover

Here’s a special full-length reprint of Asia Travel Re:Set Issue #70 – Thailand, Tourism & “Contribution to GDP”published on 23 January 2022.

Thailand is South East Asia’s second-largest economy (after Indonesia), with the region’s fourth-largest population (after Indonesia, the Philippines and Vietnam).

It is also the most-visited country in South East Asia – and, from 1 February, it will attempt for a fourth time to revive its battered inbound travel sector.

Attempt 1: Special Tourist Visa (October 2020)

Attempt 2: Phuket Sandbox (1 July 2021)

Attempt 3: Test & Go (1 November 2021 – currently suspended)

But how dependent on tourism is Thailand, and might this reliance be diluted in 2022 and beyond?

Read this issue in full HERE

Floating market in Thailand

“Thailand’s economic recovery in the period ahead remains highly uncertain and would depend largely on the recovery in foreign tourist arrivals. This is because income from spending by foreign tourists accounts for 11% of GDP and tourism-related businesses account for 20% of total employment in Thailand.”

That paragraph was written by the Bank of Thailand in March 2021.

The statistics can be interpreted in two ways, depending on your standpoint. 

Some might argue that 11% does not necessarily correlate with the oft-quoted statement that Thailand is “dependent on tourism.”

But, 11% is a high figure for one of the the 30 largest economies in the world.

Equally important is that tourism, including a robust domestic travel sector, accounts for one-fifth of employment. The pandemic shutdown of inbound tourism saw many people lose their jobs. They likely drifted into other sectors, perhaps permanently.

Quantifying Thai GDP

The Bank of Thailand and the Thailand Development Research Institute (TDRI – which advises the Thai government) now place the economic value (or direct contribution to GDP) of tourism at 11-12%.

That figure, though, is fairly meaningless without quantifying the size of the Thai economy.

According to the World Bank, Thailand’s Gross Domestic Product (GDP) in 2020 totalled USD501.64 billion. That places it among the world’s 30 biggest economies.

GDP in 2020 was significantly down from USD544.26 billion in 2019 – but a huge jump from USD281.7 billion in 2010.

Economic growth in 2021 is estimated to have been around 1% – perhaps less.

In 2022, the Thai economy is “expected to grow 3.5%-4.5%,” The Bangkok Post reports this week citing Finance Minister, Arkhom Termpittayapaisith. 

Hitting that ambitious target without a solid contribution from tourism previously would have been unthinkable. 

It might still be. 

Thailand is losing a sizeable chunk of economic value without a functioning tourism sector. Hence, from 1 February, it will try for a 4th* time during COVID-19 to resuscitate inbound arrivals. 

However, an ongoing travel stasis in Asia Pacific and structural change in Thailand’s economy – mostly caused by a coming together of various pandemic impacts – could see tourism ultimately become less valuable to Thailand.

Thailand’s target range of 3.5%-4.5% GDP growth in 2022 will rely on exports, a recovery of domestic demand and investment, particularly in infrastructure and manufacturing, which would combine to generate much-needed jobs. 

Job creation is vital. 

Thailand’s unemployment rate doubled from 2020 to 2021. An especially large number of jobs were lost in the travel sector. Some might never return.

All Eyes on Thai Exports 

Manufactured exports account for over 50% of Thailand’s GDP, and grew fast in 2021. Economic rebalancing in major purchasing markets, such as the US, EU, Japan and China, is driving export demand.

Consequently, Thai exports recorded a 15% year-on-year upswing in 2021, says the TDRI – representing a near 10-year high. This might moderate, however, in 2022. 

Even so, Thailand lags its competitors – being the 10th largest exporter in East Asia.

Interviewed this week by Channel News Asia, Dr Kirida Bhaopichitr, Economics Research Director at the TDRI, says export growth is being bolstered by Thailand being one of the world’s largest automobile accessories and parts producers. 

In addition, hard disk drive sales are thriving as more people work from home. Food products are in high demand, as are pet foods. Thailand is one of the world’s top 3 pet food producers. 

A weakened Thai Baht and the US-China trade war (forcing US importers to diversify their source markets) are supporting the export renaissance. 

And then there is the internet economy, which is enjoying era-defining growth across South East Asia. 

The value of Thailand’s internet sector is projected to increase from USD30 billion in 2021 to USD57 billion in 2025, according to the e-Conomy SEA 2021 report by Google, Temasek and Bain & Co. 

In 2019, it was valued at just USD19 billion.

New Taxes: From Tourism to Crypto Trades

Another 2022 driver could be fiscal policy – and Thailand is moving into tax-revenue raising mode.

The government announced plans to collect a new THB300 Tourism Tax from April.

The Financial Times reports this week that it is considering imposing a a flat 15% withholding tax on all cryptocurrency trades,” plus a tax on stock trades.

Turning to taxation is being considered by cash-strapped governments across South East Asia, and further new tax tweaks in Thailand are possible this year.

A Long Road Back for Thai Tourism?

So where does this leave the tourism sector?

Dr Kirida Bhaopichitr of the Thailand Development Research Institute, says the country will target a top line of “5 to 6 million visitors” in 2022.

The subdued recovery is influenced by the absence of Chinese tourists, which Dr Kirida does not expect to return “until the end of this year.” Thailand welcomed 10.99 million Chinese visitors in 2019.

She adds, though, that Thai tourism is geographically imbalanced.

While tourism benefits more people, through its extended value chain, than capital-intensive industries like manufacturing, the benefits are poorly distributed, because:

“Most visitors [to Thailand] tend to visit 6 or 7 major destinations.”

She adds that it “will probably be another three years from now” to get back to the 39.8 million visitor arrivals in 2019.

That might be considered an optimistic forecast, especially as annual inbound growth was showing signs of sluggishness before the pandemic.

According to Bank of Thailand, the country welcomed 156,930 foreign tourists from July 2021 (when the Phuket Sandbox began) through November. This included 91,260 in November, when the quarantine-free Test & Go entry scheme was in effect.

Rebuilding demand will clearly be challenging.

Indeed, the World Bank’s Thailand Economic Monitor notes in its latest issue:

“Tourism is expected to contribute 2% to GDP growth in 2022, and 4% in 2023.”

This is a 60-second speed-read of Asia Travel Re:Set Issue #70 – Thailand, Tourism & “Contribution to GDP”, published on 23 January 2022.

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