The emergence of the Omicron variant may spoil the festive mood of December and slow economic activities next year if it is eventually identified as a serious threat to public health.
The initial warning of the World Health Organization that Omicron is a “variant of concern” because of its probable higher transmissibility and resistance to existing Covid-19 vaccines was enough to shock stock indices and even oil prices last week.
The government will likely need to spend more to fend off a possible outbreak, while the business community waits anxiously to see whether Omicron will trigger a new round of sluggish economic activity.
TURMOIL IN UNCERTAINTY
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Global stock markets remain roiled amid the uncertainties surrounding the new Omicron strain as cases from the variant increase in many countries around the world.
In the worst-case scenario, analysts predict global stock markets may drop by 15-20%, with the SET Index plunging to 1,500-1,530 points if the country re-enters a lockdown, similar to what happened during the Delta outbreak in the third quarter.
Kasikorn Securities expects the Thai stock market will remain under pressure until a vaccine effective against Omicron is developed. The SET Index may be downgraded to support lines of 1,580 and 1,530 points, the same levels as during the Delta outbreak, said the brokerage.
However, with a more efficient public health system, strict social distancing measures, and advanced technologies used for tests, vaccines and available treatments, the new variant is expected to be controlled soon, said Kasikorn Securities.
Thailand is likely in a better position than some European countries thanks to higher public awareness about wearing masks and more positive attitudes about vaccination, said the brokerage.
Komsorn Prakobphol, head of the economic strategy unit of Tisco Financial Group, said in the worst case, stock markets around the world are likely to drop 15-20% from the present.
Asia Plus Securities said the stock market will have a limited chance of recovery if scientists can’t provide clarity on the variant’s transmissibility.
During the outbreak of the Alpha variant, it took 1½ months for the stock market to recover, while the Delta outbreak required two months.
MORE RISK
Phusit Ratanakul Sereroengrit, director-general of the International Trade Promotion Department, said the Omicron variant introduces more risk to the global economy, which was on the road to recovery.
“If the new variant becomes widespread around the world, it will definitely lead to tougher restrictions reinstated in many countries,” he said.
“This may cause a halt to the global economic recovery.”
According to Mr Phusit, if the spread of the new variant becomes serious and eventually prompts the government to reintroduce lockdown measures, the manufacturing and transport sectors will be the hardest hit.
If Omicron spreads to many countries, it may disrupt their supply chains, he said.
MONETARY INJECTIONS
Fiscal Policy Office (FPO) director-general Pornchai Thiraveja said the Finance Ministry stands ready to inject additional money to revive the economy if the Omicron variant causes a slump.
The fresh funds could be pumped in via existing stimulus packages, or new packages could be introduced.
Amonthep Chawla, chief economist for wealth research and advisory at CIMB Thai Bank (CIMBT), expects the emergence of the Omicron variant to not adversely impact the Thai economy, unlike the past three waves, thanks to the country’s vaccination progress.
Given Thailand’s vaccination progress, he expects Thailand can contain the variant if it arrives here without lockdown measures.
However, a risk factor for Omicron is it could dampen consumer confidence and purchasing power, slowing economic activities a bit at the end of this year and first quarter next year, said Mr Amonthep. But it will not have a significant impact on the Thai GDP in 2022 amid a recovery trend next year, he said.
CIMBT’s research office predicts the country’s tourism sector will recover in the second half of next year, estimating foreign tourist arrivals for 2022 at 5.1 million.
The Bank of Thailand said last week it has been closely monitoring the Omicron variant and could revise the country’s economic growth rate this month, in line with a recovery trend.
The institution needs more time to gather enough information for a full analysis of the strain’s effects on the economy.
SLIGHT IMPACT
Exports are unlikely to be seriously affected by the new variant, even if it becomes widespread in Thailand, said Chaichan Chareonsuk, chairman of the Thai National Shippers’ Council.
“We are monitoring the latest developments about the new strain,” he said.
“We are not underestimating the new variant, but we believe the situation is manageable given the wider coverage of vaccinations in Thailand.”
Thai manufacturers believe they have ample experience in dealing with Covid-19 outbreaks. Since the Delta variant was detected in Thailand, measures were enacted to contain the spread such as factory accommodation isolation, bubble and seal, and providing antigen test kits and RT-PCR screening tests, said Mr Chaichan.
He said Thai exports remain strong despite the Delta outbreak locally, based on strong demand from key trading partners including the US, Europe, China and Japan.
“A heavy impact on Thai exports is unlikely as long as the economies of Thailand’s important trading partners remain strong,” said Mr Chaichan.
“Still, it may sting the tourism and service sectors.”
He said exporters must prepare measures to cope with the Omicron variant if it breaks out in Thailand.
UNFAZED DEMAND
Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association, said the real consequences of the variant might be seen in the next 1-2 weeks.
It’s too soon to assume the variant will create a negative impact for Thai tourism as hotel bookings last week kept growing despite news reports about new cases globally, she said.
“The number of Thailand Pass applicants increased, while bookings from international guests were steady,” said Mrs Marisa.
“There is no sign of massive cancellations or postponements, while bookings at key destinations such as Phuket doubled as the Russian market has already returned.”
In November, Phuket had 37,278 international visitors, of which 5,126 were from Russia, followed by Germany, the UK, the US and Israel.
However, she said the tourism industry could be affected if those key feeder countries impose rigid travel restrictions to curb the Omicron variant, deterring tourists from taking overseas trips.
For example, Japanese travellers were previously the top market for Thailand, but their numbers sharply decreased after Tokyo enacted strict rules for overseas travel.
“Even though the current situation does not seem to be as severe, we have to keep our guard up, saving on operation costs as much as possible,” said Mrs Marisa.
“The actual number of guests might be impressive, but this is because we are comparing these figures with the worst of the lockdown period, which had a low base.”
She said if the Omicron variant triggers a new outbreak, the government should prepare the healthcare system to take care of Covid-19 patients instead of imposing another lockdown.
Any outbreak will be less severe if the vaccination rate significantly improves, said Mrs Marisa.
To cushion the possible impact of a new variant, the government should help the tourism industry sustain its income by strengthening domestic consumption, particularly through the tourism subsidy campaign, which should be extended to cover all of next year, she said.
“Hotels will still have to rely more on domestic guests than international arrivals next year, and the government subsidy will be the key factor to support the purchasing power of local guests amid economic uncertainty,” said Mrs Marisa.
CLEARER INFORMATION NEEDED
Similar to scientists and hospital personnel, the Federation of Thai Industries (FTI) wants more information on Omicron to determine how it will affect the public health system and whether the variant will handicap the economy.
Many companies had this response after news of the Omicron spread hit newspaper headlines, said Supant Mongkolsuthree, chairman of the FTI.
He urged the government to keep the public updated on mutations of the contagious virus so society can prepare for a new viral threat.
The business sector, already reeling from the Delta outbreak, needs clearer information to adjust preventive measures and business plans, said Mr Supant.
“We are worried because we are uncertain how virulent the new variant will be,” he said.
“Reports of its increased transmissibility, but relatively low risk to people’s health, need to be proven.”
Factory owners currently using rapid antigen test kits to prevent Delta infections among workers want to know whether they are still effective to screen for Omicron infections, said Mr Supant.
Providing complete information will lead to strong protection against new outbreaks, he said. The manufacturing sector does not want a repeat of the high number of Covid-19 cases in factories.
In August, the Industry Ministry reported Covid-19 had spread to the manufacturing sector at a worrying rate of 13 infected factories a day, with food and electronics industries at the top of the caseload table.
So far factories have used bubble and seal measures to protect their workers.
Bubble and seal is used with factories with more than 200 workers. It is aimed at restricting travel among employees.
Workers may need to stay in factories or only travel between their dormitories and workplaces, according to media reports.
The government also launched a factory sandbox scheme that includes vaccinating workers and setting up field hospitals or factory accommodation isolation facilities within their compounds.
Many companies including automakers, which bore a heavy brunt from the lockdown last year, are keeping themselves alert to the possibility of a new outbreak.
Toyota’s luxury car unit Lexus is monitoring the situation closely. If the new variant causes no serious problems, the auto industry should be on track to recover in 2022, said Surasak Suthongwan, executive vice-president of Lexus Group under Toyota Motor Thailand Co.
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