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The University of the Thai Chamber of Commerce estimated Tuesday that the Thai economy could shrink a historic 11.4 percent this year, the greatest recession the country has ever seen and more than 25 percent worse than government’s current projection.

The university said the impact of the coronavirus pandemic – and Thailand’s extreme reluctance to reopen its borders to revive its critical tourism industry – will result in gross domestic product declining 9.4 percent to 11.4 percent. The university’s Center for Economic and Business Forecasting urged the government to inject more cash into the economy and boost domestic spending.

The Cabinet on Tuesday took the first step to do just that by approving a US$1.5 billion loan deal from the Asian Development Bank to help finance economic-stimulus measures. Government spokeswoman Rachada Dhnadirek told a media briefing the agreement would be signed later this month.

The loan is part of a plan to borrow 1 trillion baht for relief measures and comes just a week after outgoing Bank of Thailand Gov. Veerathai Santiprabhob said he was confident Thailand wouldn’t need to seek international loans.

The central bank most recently forecast the economy would shrink only 8.1 percent this year and Veerathai said a loan from the International Monetary Fund wouldn’t be needed because the current slowdown was not similar to the Asian financial crisis of 1997.

In 1998, Thailand’s GDP shrank by 10.5 percent and unemployment soared to 8.5 percent. While the recession eased in 1999 – GDP fell by 2 percent – the jobless rate actually increased to 9.5 percent.

UTCC President Thanawat Phonwichai said Tuesday’s projection reflects a more pessimistic expectation than its previous report, which expected only 3.4 percent to 4.9 percent shrinkage. It’s also a quarter worse than the central bank’s 8.1 percent contraction.

The CEBF expects the export sector will shrink by 10.2 percent due to the global economic fallout stemming from the pandemic, while the import sector will shrink 19.5 percent. The overall inflation rate is expected to be a negative 1.5 percent. The BoT said it expects negative inflation of 1.7 percent.

Despite the dismal outlook, CEBF said the lowest point of the economic crisis already passed in the second quarter. However, the unemployment rate should still be closely monitored, as millions of people are expected to lose their jobs.

The center urged the government to urgently help businesses in order to preserve jobs through faster loan approvals and credit-guarantee services by the Thai Credit Guarantee Corp.

The CEBF suggested the government accelerate disbursements to projects funded by a half-trillion-baht emergency loan program to ensure such money will reach the hands of the general public as quickly as possible.

The government should urgently instigate an economic-stimulus campaign to boost domestic spending, as any delay will only worsen the situation.

It also recommended that the government extend its loan-deferment offers for another six months until the second quarter of 2021, by which point the economy is expected to recover.

He suggested that the bank would prioritize debt restructuring efforts and the emergency-loan program disbursement. The scheme has been extended into 2021 and the government has loosened terms under which firms can obtain loans.

While the government’s financial reserves could allow it to spend up to 25 percent of its GDP on new stimulus measures, the Finance Ministry said the ADB loan was a better option as it would help reduce the impact on domestic liquidity and borrowing costs for both the public and private sectors.

“The government’s external debt remains low and the finance ministry can manage foreign exchange risks”, Rachada said.

The loan will come in two tranches – $500 million for 10 years and $1 billion for five years, she said. With this borrowing, Thailand’s foreign debt will be 2.46% of the total public debt, well below the 10% limit, she added.