- Thai Prime Minister declared a state of emergency, effective on 26 March until April 30
- The economic situation is the worst hit in six decades, around 10 million people lost their job
- Lockdown and curfew has affected the polymer market in Thailand
- Several provinces in Thailand declared ‘travel restrictions’ in and out of their provinces
- Production at converters end running under 50% from normal rates
- Demand for medical use was reported healthy
- Most of the companies in Thailand prefer to avoid the layoff option
- The government may extend the state of emergency until the end of May
After being identified in Wuhan, China, in December 2019, coronavirus disease 2019 (COVID-19) has spread in more than 185 countries and territories including Thailand. The first case of COVID-19 in Thailand was confirmed on January 13, 2020. As of April 24, data showed that a total of 2,839 cases confirmed in Thailand with 50 deaths, and 2,430 recovered.
In an attempt to curb the massive spread of the disease, Bangkok governor has ordered Bangkok shopping malls to close from March 22 until April 12 and then extended until April 30 as the steps to battle against the spread of the Coronavirus. Only supermarkets, pharmacies, and takeaway restaurants will be allowed to stay open at the malls. Thai Prime Minister Prayut Chan-o-cha declared a state of emergency, effective on 26 March until April 30, with a curfew from 10PM to 4AM later announced on April 3. Following the announcement, several provinces in Thailand declared ‘travel restrictions’ in and out of their provinces. In addition, the government also called off the Songkran festival (Thai New Year) amid the outbreak. However, on March 30, a local converter stated that as there is no lockdown yet, business on his side is running as usual and demand remains good, and for food and beverages manufacturers are still running as usual, the demand for packaging is healthy.
Due to the effect of the outbreak, the economy sector begins to feel the pinch. IMF foresees a 6.7% drop in Thai GDP in 2020, making it the worst performer among other Southeast Asia countries. Thai Chamber of Commerce (TCC) members believe that the economic situation is the worst hit in six decades since all sectors have been affected by COVID-19 and will likely putting around 10 million people losing their jobs if the coronavirus outbreak continues for a few months. The bank of Thailand cut its growth outlook to 5.3% contraction in March and predicted another contraction in every quarter with the lowest contraction in the second quarter of 2020, from April to June. Moreover, on April 16, the Thai Bankers' Association (TBA) stated that the current economy could suffer a loss of 1.3 trillion baht ($39.98 billion) as the damage of COVID-19, representing 7.7% of GDP, equal to the economic contraction from the financial crisis of 1997. The Commerce Ministry’s Trade Policy and Strategy Office (TPSO) added that the weakening of Thai Baht strengthens Thai exports. After previously contracting 4.47% in February, exports in March 2020 had entered positive territory due to the weakening of Thai Baht against US Dollar, when compared to the same period last year, which showed a contraction of 5.04%.
SSESSMENTS.COM noted, to minimize the negative economic impact on employers and employees in the sectors most affected by the outbreak of COVID-19, Thailand's cabinet approved a fiscal package of economic measures worth 1.9 trillion baht ($58 billion). According to Thailand Finance minister, Uttama Savanayana, the package includes a law to borrow 1 trillion baht ($30.85 billion), plus central bank measures worth another 900 billion baht ($27.68 billion) in soft loans and support for corporate bonds. The government plans to introduce a new stimulus package by borrowing 1 trillion baht ($30.85 billion) in June to boost domestic consumption and to mitigate the impact of the outbreak on jobs as the private sector planned to support businesses via an equity fund. In 2021, the IMF indicates strong growth and is projected to rebound to 6.1% of GDP.
Thailand's market has been flat even before the Coronavirus affected the global market and the outbreak in the country has worsened the situation. Lockdown and curfew have affected the polymer market in Thailand. A plastic packaging manufacturer confirmed that demand for the automotive sector is very weak. Many automotive businesses shut their production starting on March 27 until the end of April due to the outbreak; hence the order from the manufacturer’s end also dropped.
While most of the converters and manufacturers reported slow demand for finished products as people rarely go outside except for urgent matters. Orders and sales drop drastically, especially for those supplying to malls in Thailand. Moreover, as the demand gradually vanished, buyers hesitated to make procurements for polymer materials and only take around 50% of normal volume. A PVC film manufacturer commented to SSESSMENTS.COM, “our production currently only running 30% after pandemic affected the market globally. 90% of our products are exported to Southeast Asia and the Middle East, mainly to Indonesia, Malaysia and Philippines, even if some countries have not imposed lockdown yet, buyers have a low interest to purchase and we received some cancellation. For the Middle East, we also could not sell or ship to Dubai as the country is locked down”.
Further added, a distributor stated that some converters are planning to shut their factories if the demand does not improve in the near time to avoid a high inventory of finished products. However, demand for medical use such as alcohol bottles and several other products like hand wash and hand sanitizer bottles were reported healthy.
Despite the slow demand, most of the companies in Thailand prefer to avoid the layoff option. Some of them are giving minimum pay rates to the workers. The layoff is the last choice considering the difficulties to resume production at a full rate once the situation is back to normal due to the lack of workforce. While a flexible sheet converter applied 3 days work-3 days off in the factories and work normally in the office. Moreover, the company provides transportation for the employees to minimize the possibility of virus spread, SSESSMENTS.COM was told.
Even if COVID-19 will be over in a few months, the government will have to help enterprises that close business during the crisis and suffer from bad debts because of the slow business over the past few months. As such, throughout 2020, the government spendings will be mostly on this corona crisis recovery. A local converter informed SSESSMENTS.COM that demand of his finished products, PVC Film and roll usually reach the peak from January until April and gradually decrease from May onward. However, with this outbreak, the sales could not reach the peak and for May onward, no clear outlook for demand condition.
With that being said, Thailand’s market outlook for Q2 will remain bearish. The export market predicted a fall of 7.9%. While Q3 was no different. The government may ease its partial national lockdown starting from early May in provinces that are free of COVID-19 infections. According to the Health Ministry, 35 of 77 provinces in Thailand haven’t reported any cases for two weeks, while nine haven’t detected any at all. Towards the end of April, The Centre for COVID-19 Situation Administration (CCSA) recommended to extend the state of emergency for another month until the end of May in concern over the possibilities of second wave outbreaks. However, as cases gradually decrease, the government will consider to ease some restrictions on businesses and public activities. The new measures are subject to Cabinet approval.
Tags: All Chemicals,All Plastics,All Products,Analysis,Asia Pacific,English,PE,PET,PP,PVC,SEA,ThailandPublished on April 29, 2020 12:09 PM (GMT+8)
Last Updated on April 30, 2020 12:36 PM (GMT+8)