Thailand cut its estimate for economic growth this year to 2.5% to 3.5% after suffering its worst slump in more than two decades in 2020 due to the shock from the COVID-19 pandemic.

The government had previously forecast growth 3.5% to 4.5% for this year, and the downward revision comes despite latest data showing the economy shrank less than expected in the October-December quarter as domestic activity and exports recovered after coronavirus restrictions were eased.

The vital tourism sector remains in limbo because of international travel restrictions, and a COVID-19 outbreak in December has dealt a further blow to the country’s fledgling recovery.

Southeast Asia’s second largest economy shrank 4.2% in the final quarter of 2020 from a year earlier, after a 6.4% contraction in the previous 3 months, National Economic and Social Development Council (NESDC) data showed on Monday, February 15.

On a quarterly basis, the economy expanded a seasonally adjusted 1.3% in the December quarter, after a revised 6.2% expansion in the September quarter.

Economists in a Reuters poll had forecast the economy would shrink 5.4% year-on-year and grow 0.8% quarter-on-quarter.

In 2020, the economy contracted 6.1%, the biggest fall since 1998, during the Asian financial crisis.

Thailand had largely contained the spread of the coronavirus by mid-2020 but new cases detected in December have led to infections across the country and slowed consumption and domestic travel.

The NESDC now expects exports, also a key driver of growth, to rise 5.8% this year, rather than expand 4.2%.

But it also forecasts just 3.2 million foreign tourists this year, down from an earlier forecast of 5 million arrivals.

Last year, there were only 6.7 million foreign tourists versus nearly 40 million arrivals in 2019.

The government has supported the economy with a 1.9-trillion-baht ($63.61-billion) stimulus package, while the central bank has slashed interest rates by 75 basis points last year to a record low of 0.50%. – Rappler.com