Thailand Q2 economy shrinks sharpest since Asian financial crisis

The coronavirus pandemic and subsequent restriction measures has hit Thailand's tourism. /VCG

Thailand's economy saw its biggest annual contraction in 22 years and a record quarterly fall in the April-June period as the coronavirus pandemic and restriction measures hit tourism, exports and domestic activity, prompting an outlook downgrade.

The Southeast Asia's second-largest economy, which is heavily reliant on tourism and exports, shrank by 12.2 percent in the second quarter from a year earlier, the worst contraction since the Asian financial crisis in 1998, data from the state planning agency showed.

But it is better than the 13.3 percent slump projected in a Reuters poll.

The National Economic and Social Development Council cut its gross domestic product forecast for 2020. It now expects Thailand's economy to shrink by 7.3-7.8 percent this year, having previously forecast a 5-6 percent contraction.

While Thailand has lifted most lockdown restrictions after seeing no local transmission of the coronavirus for over two months, its economy continues to suffer from an ongoing ban on incoming passenger flights and tepid global demand.

The number of foreign visitors fell to zero between April and June. The planning agency expects only 6.7 million foreign tourists to visit Thailand this year, down 83 percent from last year's record 39.8 million.

"Today's economic release underscores the collapse of aggregate demand, both externally and internally," said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.

"Recovery will be lengthy, as the shock to the demand and supply side has been the most severe in living memory," he said.

(With input from Reuters)