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Insights and Analysis

The Future of Work: Another Storm on the Horizon for Thailand

August 19, 2020

By Thomas Parks

Thailand has fared extremely well in managing the Covid-19 pandemic. Thailand was the second country, after China, to report a Covid-19 infection, yet there have been fewer than 3,500 cases since that day in January, and only 58 deaths. While there is broad speculation about why, Thailand’s public-health response has been an unqualified success by any measure. Given that Thailand is a hugely popular destination for international visitors and a hub for mainland Southeast Asia, it is a remarkable accomplishment for Thailand’s people and government.

But despite this success, another storm is brewing on the horizon. The Thai economy is showing early signs of a severe and prolonged contraction that will rival the Asian Financial Crisis of the late 1990s. The macroeconomic outlook continues to deteriorate as borders remain closed, and the prospect of tourists returning is increasingly distant. The Bank of Thailand recently predicted that the Thai economy will contract by 8.1 percent in 2020, while a prominent local bank is predicting 8.8 percent. By comparison, the worst year of the Asian Financial Crisis witnessed a 10.5 percent contraction.

On the surface, the signs of a looming crisis are not clearly visible. Since lockdowns were gradually eased in May and June, economic activity has seemed to rebound: traffic returned to the city, markets and malls in Bangkok filled with customers, and clear signs of reopening spread across the country. Beginning in June and July, some popular vacation spots such as Hua Hin welcomed a wave of local visitors, raising hopes that the tourism sector could recover despite the lack of international visitors. To be honest, for many officials and analysts based in Bangkok (as I am), it is hard to see an imminent economic crisis.

A small clothing shop in Bangkok. On the surface, the signs of a looming crisis are not clearly visible. (Photo: The Asia Foundation)

Like an invisible ocean tide, however, there are emerging and unmistakable indications of widespread economic distress on the ground. Next week, The Asia Foundation will release a survey exploring the economic impact of Covid-19 on small businesses and the Thai workforce. The first of the planned three rounds of surveys was conducted in late May and June through phone-based outreach to randomly selected individuals and businesses in every region of the country. The survey focused specifically on small and micro businesses with an average of 10 employees in tourism and small-scale manufacturing.

Survey results suggest that Thailand is in the early stages of an economic crisis that could far outlast the pandemic. Personal incomes are contracting at an alarming rate. Seventy percent of the national workforce has seen their monthly income decline, with an average contraction of 47 percent. Eleven percent of micro and small businesses in tourism and small-scale manufacturing are on the verge of closing permanently, and nearly one-third of survey respondents (31 percent) expect to shut down in six months or less.

Tourism, as expected, has been heavily affected. As of June, 75 percent of small tourism enterprises had no income at all, or merely a fraction—less than 25 percent—of their pre-Covid revenues. Most of the small businesses in this critical sector are struggling to survive, with 61 percent at risk of closing permanently. We interviewed a well-established restaurant that caters to domestic tourists in Khao Yai, a favorite mountain getaway for denizens of Bangkok. Opened in 1994, it survived the Asian Financial Crisis of 1997–98. According to the owner, “This crisis is the worst we have ever seen—far worse than the Tom Yam Goong [the Asian Financial Crisis].”

A Bangkok taxi driver waits for a fare. Survey results suggest that Thailand is in the early stages of an economic crisis that could far outlast the pandemic. (Photo: The Asia Foundation)

The troubling news goes well beyond tourism. Small manufacturers are struggling, even those unconnected to tourism. As of June, 70 percent of small and micro manufacturing businesses were making half or less of their pre-Covid revenue. Only 68 percent of interviewed business are operating normally, despite the full relaxation of lockdown measures. Businesses that we spoke to in Buriram and Nakhorn Ratchasima told us that customer demand is not recovering, especially for nonessential products. A small manufacturer of customized T-shirts told us that no one is buying their products right now because sporting events and company retreats, their usual market, are all cancelled or postponed. They tried to shift to making masks, but that market quickly became saturated with competitors. Now they are burning through the last of their savings, trying to pay off their debt for newly purchased machinery.

Data shows a recovery in the shape of a prolonged, deep U rather than a quickly rebounding V. We asked businesses whether their revenue had improved since the relaxation of the lockdowns. The vast majority have seen barely any improvement. In the tourism sector, 60 percent of small businesses have seen no improvement at all, and just 3 percent are back to their pre-Covid sales. Manufacturing businesses are faring only slightly better, with three out of five seeing less than half of their pre-Covid revenue, and just 12 percent back to their pre-Covid level.

As businesses are in survival mode, they have been letting go of employees at an alarming rate. The average small and micro business has let go 45 percent of their staff, while tourism-related businesses have let go of nearly 60 percent. Informal workers, with no unemployment insurance or social security, and part-time workers have been the hardest hit. Tourism businesses, for example, have let go 81 percent of their informal workers.

With widespread layoffs and plummeting personal incomes, there is growing skepticism that a rebound is coming. The surveys show that just 38 percent of Thai workers are confident that they can weather the crisis without running out of money or options. Sixty-seven percent of women and 70 percent of informal workers said that they cannot last a full year, and when we asked these respondents how long they could hold on, the average answer was two and a half months before they ran out of savings.

Sixty-seven percent of women and 70 percent of informal workers said that they cannot last a full year, and the average respondent expected to run out of savings in two and a half months. (Photo: The Asia Foundation)

While the economic downturn has been felt at all income levels, the poor and less educated have been hit the hardest. More than 84 percent of people with only a primary education have seen their incomes decline—by an average of 63 percent. By comparison, 36 percent of people with advanced degrees have lost income, and the average decline is 21 percent. This regressive economic impact is a major concern for a country with already high levels of inequality.

But Thais in the middle of the economic spectrum are also vulnerable. Millions of people in the lower-middle classes could slip closer to poverty. People in the middle of the income spectrum—those earning THB 15,000–30,000 per month—have been heavily affected as well, with 61 percent seeing an average 37% decline from their pre-COVID monthly income. As their income contracts, this huge population in the middle is spending less, eating out less, and postponing travel, depressing consumer demand.

Some people and businesses are finding creative ways to adapt to the crisis. Twenty-nine percent of small businesses have expanded online sales, while 14 percent are offering new products or services. A small kluay tawd (fried banana) producer in the rural northeast shifted nearly all its sales overnight to social media in response to the lockdowns. As of June, they were still using these new online channels for 50 percent of their sales, and their overall revenue has nearly recovered. There are clearly some winners in the new normal, such as online delivery services like Grab and Food Panda. But 54 percent of small businesses have not changed a thing, including the majority of businesses at high risk of permanently closing.

The Thai government’s response has been quick and comprehensive. Government initiatives have largely addressed the most urgent challenges, and beneficiaries gave them high approval ratings in our survey. But the survey data also reveals a few important gaps, where assistance programs are missing some of the most vulnerable groups. The government’s soft loan program for MSMEs, for example, had only reached 19 percent of small businesses in our two target sectors, and many of the most vulnerable businesses have not accessed these funds.

Bangkok street vendor. Informal workers, with no unemployment insurance or social security, and part-time workers have been the hardest hit by the economic slowdown. (Photo: Bob James Photo Bangkok /

How can Thailand weather the coming storm, and how long must it endure? It is clear that government programs are providing a critical lifeline to millions of Thai workers and small businesses, and these should be continued and regularly recalibrated to ensure that they are reaching the intended beneficiaries. Unlike the Asian Financial Crisis, this slowdown is global, and in Thailand the impact is concentrated on tourism and other sectors that require cross-border movement of people. This means that the rebound will be much slower than in past economic crises: in 1998, for example, the devaluation of the Thai baht helped boost Thai exports and tourism in the short term. Thailand needs to settle in for an extended downturn and find ways to help people and small businesses adapt to a new, and harsher, reality.

Our next round of data collection starts this week. We hope to see more workers and small businesses successfully adapting to the new exigencies. Thailand’s booming tourism industry will return one day. The key for now is to help small businesses and workers find a way to outlast the storm.

Read the full publication, Enduring the Pandemic: Surveys of the Impact of Covid-19 on Thai Small Businesses.

This article is part of The Future of Worka special series from InAsia focusing on jobs, digitalization, and automation in Asia. This online conversation includes insights and research from policymakers, corporations, and Asia Foundation experts on issues shaping the livelihoods of millions of workers across the region.

Thomas Parks is The Asia Foundation’s country representative in Thailand. He can be reached at [email protected]. The views and opinions expressed here are those of the author, not those of The Asia Foundation.

Related locations: Thailand
Related topics: The Future of Work


  1. Thanks for collecting and presenting in context good data that can be used to inform decision making.

  2. Came to the blog to read and found my photo you bought through Shutterstock. Nice!

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