How tourism is helping Thailand's economy recover.

Tourism has long been a vital pillar of the Thai economy. Before the pandemic, in 2019, the country's tourism revenue was nearly $60 billion, accounting for 12% of GDP and employing 20% ​​of the workforce.

When Covid-19 emerged, due to anti-epidemic measures, tourism declined, and Thailand's growth slowed accordingly. In 2021, the number of international visitors to the country dropped to only 428,000, resulting in a GDP growth of just 1.5%.

Therefore, upon reopening, Southeast Asia's second-largest economy sees the revival of tourism after the pandemic as crucial. The return of Chinese tourists brings even more hope, despite the continued weakness in manufacturing and exports. According to HSBC's forecast, Thailand will be the biggest economic beneficiary of the tourism recovery by 2023.

To quickly revive its tourism industry, Thailand has continuously introduced new ideas and boldly experimented with them. In March 2020, when Covid-19 was still a major concern for international tourists, Thailand decided to launch a trial of welcoming tourists during the pandemic called "The Phuket Sandbox". Initially, tourists from 66 markets stayed in isolation for 14 days at a hotel on the island.

After a month, the program was upgraded to "Phuket Sandbox 7 + 7 Extension," where guests stayed 7 days in Phuket followed by 7 days on other designated islands before traveling to their desired destinations. Over three months, they welcomed 47,610 guests.

By November 1, 2021, Thailand replaced the requirement with a "Test & Go" program, allowing visitors who had been vaccinated and tested with a PCR test. Visitors needed to quarantine overnight while waiting for results and would be free to travel if negative. This policy quickly proved successful, with Thailand welcoming 91,260 visitors in November and increasing to 230,500 in December. On May 1, 2022, they discontinued the PCR test, and visitors only needed to register for a Thailand Pass. To streamline the process, the Thailand Pass was discontinued from July 1, 2022.

Along with addressing early pandemic control barriers, the Tourism Authority of Thailand (TAT) proposed three policies that later became key to tourism recovery. These were: extending the visa-free period for eligible nationalities from the usual 30 days to 45 days; increasing visa extensions from 15 to 30 days; and increasing flight frequency.

TAT argued that by increasing the maximum permitted length of stay, tourists would stay longer and spend more. They predicted that the average tourist would stay 5 days longer than before. If the average daily spending of tourists is 4,000-5,000 baht, this would add approximately 20,000 baht per tourist to their trip to Thailand. This means more money flowing into the economy. By combining multiple measures, Thailand has been successful. By 2022, with tourist numbers recovering to 11.15 million (exceeding the target of 10 million), economic growth improved to 2.6%. The lower-than-expected GDP result was due to a decline in exports as global demand weakened. However, the tourism sector maintained positive growth compared to 2021.

This year, with purchasing power remaining sluggish, the Thai Retailers Association (TRA) forecasts retail sales will increase by 6% to 8% thanks to a recovery in tourism. Meanwhile, according to Kae Pornpunnarath, Head of Equity Research Thailand at JP Morgan, increased spending by non-residents will boost consumer confidence, which remains below average.

"In addition, the Thai government's approval of the 'Shop Dee Mee Khuen' tax reduction program – providing tax deductions of up to 40,000 baht for goods and services purchased between January 1 and February 15, 2023 – further boosts spending in the short term," said Kae Pornpunnarath.

New ideas to increase revenue continue to emerge. From June 1st, international visitors will pay an entry fee of 4 to 9 USD. When implemented, this will generate over 115 million USD this year alone. Previously, on September 1st, 2022, to attract high-income foreigners to stay longer, Thailand introduced a new version of the Long-Term Residency Visa (LTR), with a maximum stay of 10 years. Their goal is to attract one million tourists under the LTR visa, generating 24.8 billion USD in 5 years through investment and real estate purchases by these individuals.

In addition to policy, this year, the Tourism Authority of Thailand is implementing multi-targeted marketing strategies to attract tourists from different groups such as health and sports tourism; and "digital nomads," i.e., those who work remotely via the Internet.

The Thai government also encourages local tourism businesses to adopt the Bio-Circular-Green (BCG) economic model to attract a younger generation of tourists who prioritize sustainable travel.

According to the Economist Intelligence Unit (UK), tourism is expected to be one of the main sectors contributing to Thailand's GDP growth in 2023, as the goods export sector is projected to experience slower growth.

"The recovery in tourist numbers will continue to strengthen in the coming years, which will support jobs and income in the tourism industry and related sectors," the unit assessed.

Ju Ye Lee, an investment banking expert at Maybank, believes that China's reopening will not only boost tourism (tourism revenue from Chinese visitors accounted for 3.1% of GDP in 2019) but also help support goods exports – a key factor slowing growth in the fourth quarter.

Thailand's industrial sentiment index, measured by the Federation of Thai Industries (FTI), also improved as tourism recovered. In February 2023, the index rose to 96.2, up from 93.9 in January, marking a return to pre-pandemic levels.

For the full year, Nomura Holdings forecasts that the Thai economy will grow by 4% due to the resurgence of tourism, with the number of foreign visitors reaching 30 million, higher than the 28 million projected by the National Economic and Social Development Council (NESDC).

Bi Le