Thailand’s tourism returns to spur growth, but downside risks remain as global recession expected in 2023

Thailand’s tourism is back on track and hopes are that things are likely to get better going forward amid reports emerging that China is set to open its borders in the very near future.

Tourism, which accounts for more than 15% of the gross domestic product (GDP), has seen a sharp recovery over the past few months since July 1st reopening of the Thai borders with more than 7 million visitors having step foot in Thailand since the start of this year.

In a statement released by the Tourism Authority of Thailand (TAT), Yuthasak Supasorn, the governor of TAT, came out to say that a total of 7,349,843 visitors entered the borders of Thailand with Malaysian accounting for the biggest market (1,246,242 Malaysian entered Thailand).

The rise in the number of tourist has many analyst to come out to state that things are likely to see further improvement.

“We expect October arrivals to reach 1.45 million and head toward 1.6-1.7 million per month in the remaining months which would end the year with 10.5 million arrivals,” Pipat Luengnaruemitchai, economist at Phatra Securities said.

“This is in line with the daily inbound through all airports which is now reaching the level required for the target to be met at 55,000 per day.”

He says that with the rising number of tourists there has been some significant structural changes in tourism markets, compared to pre-COVID. The largest tourism markets have changed from China to ASEAN (Association of Southeast Asian Nations) tourists.

Pipat said that China used to account for 27.6% of total arrivals before COVID-19 but now accounts for only 2.5%. Europe has emerged as the new main market and accounted for almost half of the arrivals in early part of this year. But after ASEAN countries started to open their borders from May onward, the main source of arrivals has changed to ASEAN which accounted for almost half of the arrivals in May-September.

China’s reopening is looking more likely although a formal approval is yet to be announced. Reports have started to emerge that China was ‘studying’ a gradual reopening of the country although these reports are not formal announcements. These reports suggests that China may start to reopen its borders as early as March 2023.

Reports that China was looking to reopen its borders has prompted a major rally in the capital markets for the past 2-days where the country’s markets saw a rally that added more than US$ 450 billion in market capitalization.

Lower Spending

Pipat says that one of the implications from this structural change is tourism revenue. According to a survey in 2019, European tourists spend on average 68,000 Baht (around US$1,800) per head per trip and Chinese tourists about 47,000 Baht (around US$1,250), which are greater than the average of ASEAN tourists by 2.4 and 1.7 times, respectively.

More tourists would be needed to maintain the same level of revenue as before. For example, with more than half of the arrivals in September from ASEAN, their spending only accounted for 35% of total revenue. Meanwhile, Europe only accounted for 13.8% in terms of arrivals, but their share of revenue was 22.5%.

“For 2022, we think our target of 10.5 million tourist arrivals is achievable. However, we have a lower visibility for 2023. We expect tourist arrivals to maintain its pace next year, with a target of 18.5 million. Given China’s Zero-COVID policy, we assume only 1 million Chinese tourists for 2023 (only 9.2% of 2019 arrivals),” Pipat said.

Adding that there would be an upside risk to the estimate if China were to open up its borders sooner than Phatra’s expectations.

“The key downside risk would be a global slowdown and persistently high oil prices and plane ticket prices.”

The world is heading towards a recession phase as the central banks around the world continue to raise rates in order to tame the runaway inflation.

The US’ Federal Reserve late last night raised its 4th 0.75% rate hike in as many months taking the rates to 3.75-4.00% and Jay Powell, the head of FED warning that the terminal rate may well be above what the market expects (at the moment it was expected to be 5%).

thailand’s tourism returns to spur growth, but downside risks remain as global recession expected in 2023
thailand’s tourism returns to spur growth, but downside risks remain as global recession expected in 2023
thailand’s tourism returns to spur growth, but downside risks remain as global recession expected in 2023