The imposition of more lockdowns in Thailand is expected to worsen the nation's record unemployment rate and household debt, analysts said. The nation is planning to shut down its capital city for at least two weeks starting Monday as it fights to contain a new outbreak of the coronavirus.
As of this week, shopping centers, coffee shops, retail outlets, massage parlors and other establishments will be shut in greater Bangkok. The city accounts for about 50% of Thailand's gross domestic product.
The government has imposed new mandatory work-from-home rules for all company and government employees. A citywide nighttime curfew will also go into effect and all unnecessary domestic travel will be banned.
Analysts said the measures will negatively affect restaurants, airlines and retailers already reeling from previously imposed restrictions over the past two years.
"The economic hit will be increasingly bigger with each lockdown even if the length of the lockdown is the same. This is because many companies are already nearing the end of their tether after so many months of ever-shrinking revenues and stubbornly high cost of existence," analysts at Maybank Kim Eng Securities Thailand said.
Thailand has decided to close down its borders and tightened restrictions because of the recent spread of the more contagious delta variant. The new wave of cases has also derailed Prime Minister Prayuth Chan-Ocha's goal of reopening the country to vaccinated tourists.
Analysts expect household and corporate earnings to decline. Economists at DBS Bank said the downside risk for Thailand's growth forecast remains high given the imposition of more restrictions.
Before the announcement, Thailand's central bank said a prolonged outbreak would significantly hurt business liquidity and employment. The bank said it didn't expect the country's economy to return to pre-Covid levels at least until 2023.
On Monday, the Bank of Thailand downgraded its 2021 gross domestic product forecast. The bank said it will closely monitor the economy for the duration of the new restrictions to see if it needs to implement additional supporting measures.