Thailand Economic Focus: COVID-19 will likely lead to severe job loss, with impacts already evident in the first quarter

A combination of the COVID-19 pandemic, the economic downturn and climatic patterns is widely undermining employment conditions in Thailand across all 3 sectors – services, manufacturing and agriculture.

• The lockdown measures implemented to reduce the spread of COVID-19 has the most impact on workers in tourism and related industries, including hotels, restaurants, entertainment, as well as wholesale and retail trade. Such businesses have been affected by the plunge in numbers of tourists.
• The anticipated severe economic recession is affecting the manufacturing sector, with a likely W-shaped recovery.
• Meanwhile, workers in the agricultural sector are hindered by the worst drought in decades and hampered by declining purchasing power. As such the agricultural sector may not be able to absorb unemployment from other troubled sectors as it has in past economic crises.

The impact of the COVID-19 pandemic was beginning to show signs of impact in the first quarter of 2020, as average working hours declined and more than 170,000 people in the formal sector filed for unemployment insurance. While significant uncertainty remains about the ultimate impact on the labor market, in late May 2020, the NESDC estimated that 8.4 million manufacturing and services jobs were at risk from COVID-19 in the second quarter and the third quarter of 2020 (2.5 in tourism, 1.5 in the industrial sector, and 4.4 in other services). This is in addition to 6 million farmers at risk from drought and water shortages.

Moreover, COVID-19 will increase Thailand’s working poverty as the volume of work measured in terms of hours worked falls along with declining economic activities. The loss of income among informal workers will push many below the poverty threshold. Therefore, the share of the working poor in Thailand is expected to increase from 4.7% to at least 11% of total employment this year according to the ILO’s study.

The Thai government has so far approved three fiscal stimulus packages to address the short-term challenges. The responses are primarily focused on supporting vulnerable households and firms, particularly workers in the informal sector and small and medium enterprises (SMEs) to cushion loss of incomes and avoid mass unemployment and bankruptcies.

However, the government should also take action to rebuild human capital for the future. In doing so, fixing the skills mismatch will be critical. Even before the pandemic hit, this was no simple exercise; it required an understanding of the implications of everything from education and training to social safety nets. But this knowledge is vital to craft national skills strategies that can meet future labor force challenges. And for Thailand, it could accelerate productivity growth and enhance the future-readiness of their human capital.

Boosting productivity and human capital, which is enshrined in Thailand 4.0, will strengthen the nation's industry for sustainable growth and economic value creation to pave Thailand’s way out of the middle-income trap. However, it is not everything; it is only a necessary but not a sufficient condition for success. Long-term improvements in Thailand’s economic well-being also require drastic economic, social and structural reforms - including but not limited to infrastructure investments, educational reforms, legal improvements especially with regard to property rights and regulatory burdens for businesses, as well as improvements in government efficiency and good governance. These all-round upgrading policies will ensure Thailand a safe, undisrupted trip on the road to prosperity over the years to come.

The views expressed within this publication are solely those of the author and do not necessarily carry the endorsement of the United Nations. Views expressed reflect the author’s judgment as at the date of this publication and are subject to change.