Thailand’s economy faces fresh turbulence after China banned outbound group tours to try and limit the spread of the novel coronavirus that’s sickened thousands.
Chinese holidaymakers — many on group tours — spent almost $18bn in Thailand last year, more than a quarter of all foreign tourism receipts, government data show. The industry as a whole contributes 21% to gross domestic product, according to the World Travel & Tourism Council. Both tourism and exports were already under pressure from a surge in the Thai currency. Disarray over the annual budget is another obstacle for growth. The government has rolled out more than $10bn of stimulus steps in the past few months to cushion the economy, which the Bank of Thailand estimates expanded at the weakest pace in five years in 2019.
“The outbreak of coronavirus is a risk,” Tim Leelahaphan, a Standard Chartered Bank economist in Bangkok, wrote in a note. “The strong Thai baht may also affect tourism growth. That is unlikely to help an already-slowing economy.”
The new coronavirus originated in China, where dozens have died from the illness. A number of nations have diagnosed the infection in travellers from China. Thailand has so far confirmed eight cases, with five already discharged and the remainder hospitalised.
Health Minister Anutin Charnvirakul in a Sunday briefing in Bangkok advised Thais to avoid travelling to China until the situation improves. But he added there’s no crisis that requires Thailand to curb Chinese arrivals.
“We’re ready to take more steps if things escalate,” he said. “We won’t hesitate as the health of the Thai people is our priority. The potential economic impact won’t outweigh the safety of our people.”
At the same briefing, Tourism Minister Phiphat Ratchakitprakarn said the ramifications of China’s restrictions on outbound groups depend on how long the curbs are imposed. Revenue losses could reach 50bn baht ($1.6bn) if they are in place for three months, he estimated.
China’s prohibition takes effect on Monday and may spell more pain for Thailand’s Tourism & Leisure equity index. The gauge slumped more than 6% last week, making it the third-worst performing industry group on the stock exchange.
Investors should avoid tourism-related stocks like Airports of Thailand Pcland hotel operators, which are likely to under-perform the market in the next three months, said Win Udomrachtavanich, chairman of Ktb Securities (Thailand) Pcl in Bangkok.
“There’s going to be a significant drop in the number of Chinese coming to Thailand in what should be a peak period,” Win said.
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