Tourism rebound lays foundation for Thai economic recovery
The recent recovery in tourism, as reflected in the rapid rise in foreign arrivals, is offering Thailand’s ailing economy a lifeline in the aftermath of the COVID-19 pandemic.
The government and the private sector have both placed high hopes on the recovery of the tourism sector to serve as an engine for growth of the overall national economy, which is currently grappling with high inflation.
State officials estimate 8 to 10 million foreign tourist arrivals this year, based on the first seven months of data. Foreign arrivals in the first seven months rose to 3.2 million, jumping over 5,000 percent year on year, according to the Tourism and Sports Ministry.
Most countries have eased COVID-related restrictions and made travel easier, with the pandemic under control globally.
The Thai government has eased mobility restrictions and fully opened its borders to tourists since June. In July alone, the number of international tourists jumped over 6,000 percent to 1.2 million. Tourist arrivals from India rose 48,000 percent to 106,139, ASEAN visitors were up 37,000 percent to 500,947, visitors from Europe were up 2,500 percent to 198,872, and there was an over 2,000 percent increase in travelers from the Middle East to 66,252.
Role of a weak baht
The baht has progressively weakened this year, which has however been a boon for Thai export of goods and services. The baht recently slumped to 37 to the US dollar, a 16-year low, making Thailand’s tour package prices inexpensive relative to other competitor destinations.
The Siam Commercial Bank’s Economic Intelligence Center (EIC) recently revised upward its economic growth projection to 3 per cent, citing the unexpected higher number of foreign tourist arrivals. The center was also optimistic about the economy, which is estimated to grow 3.7 percent next year, riding on the tourism rebound.
The EIC has forecast that the number of foreign tourists will rise to 10.3 million this year and soar more than two and a half times next year to 28.3 million. It is also believed that domestic tourism should strengthen and return to the pre-COVID level in 2023.
Somprawin Manprasert, chief economist and chief strategy officer at the EIC, said that tourist spending would boost domestic consumption, which remains weak, as people are facing high energy prices and overall high cost of living.
To make tourism more vibrant, the government also needs to promote domestic tourism by encouraging Thais to travel within the country, he suggested.
There is also the issue of tourists flocking to only a few traditional favorite spots such as the capital, Bangkok, the resort island of Phuket, and Pattaya.
Not all hotels have benefited from the recovery in tourism and some are still struggling to survive. “Those benefiting from the recovery are four- or five-star hotels,” he said. Tourists from Europe are usually the customers of those hotels.
He predicted that 2023 would be better for the hotel industry as tourists from more parts of the globe are expected to visit Thailand.
The EIC expects more tourists from China to visit Thailand next year, anticipating an easing of the strict zero-COVID policy implemented by the government, which would allow more Chinese people to travel overseas.
Chinese tourists contributed in a big way to the large expansion of the tourism industry in the pre-COVID period, as their numbers accounted for almost 28 percent of some 40 million tourists Thailand received in 2019, the year before the pandemic.
Hotels reel under high costs
The Thai Hotel Association (THA) recently complained about the high cost of energy, taxes and labor cost as the government increased its minimum wage by about 5 percent this year.
Thailand also has a problem of oversupply of rooms, as new hotels are still being built every year, said Marisa Sukosol Nunbhakdi, the THA president.
“New land and building taxes have also added to the cost of operation of the hotels,” she said.
Local governments have started collecting the full tax rate of 0.3 to 0.7 percent this year after the government did not extend the exemption allowed for the past two years. She said that hotels have been facing a liquidity crunch as they had no income for over two years during the pandemic, hence they did not have the ability to pay land and building taxes.
The Treasury Department’s national land appraisal price list for 2023-26, would increase average land price by 8 percent, automatically increasing the tax burden.
Global recession risk
There are downside risks for both the tourism industry and the Thai economy as a whole if there is a global recession.
The International Monetary Fund has forecast that the global economy would expand only 2.9 percent next year as major economies such as the United States, Europe and Britain are facing high inflation and central banks are raising interest rates aggressively.
The World Bank recently warned that interest rate hikes by central banks around the world could trigger a global recession in 2023. The World Bank said that the global economy was in its steepest slowdown since 1970.
It said a study found that the world’s three largest economies — the US, China and the euro area — have been slowing sharply.
Oil prices remain high as there are no signs of an end to the Russia-Ukraine war, causing energy, food and fertilizer prices to skyrocket.
Source: Thai Public Broadcasting Service