Prime Minister Prayuth Chan-ocha urged the public on Monday to stay home and avoid travel after authorities closed a series of venues - from schools to bars - and restricted business hours in Bangkok and some other provinces this month.
Thailand had largely controlled the virus by mid-2020 but a cluster linked to migrant workers in December has led to infections in more than half of its provinces.
Economists worry the latest outbreak will hurt retail spending and deal another blow to Thailand's key tourism industry, both central to the government's 1.9 trillion baht ($63.57 billion) stimulus efforts to reignite growth.
"It's very tough. People don't want to spend," said Chanaporn Fongwichai, a 31-year-old clothes vendor in the city of Udon Thani, adding that sales at her shop have halved since the latest outbreak started.
Southeast Asia's second-largest economy suffered its biggest annual slump since the Asian financial crisis in the second quarter of 2020, hard hit by a ban on foreign visitors, while coronavirus curbs also hurt spending and investment.
While the loosening of restrictions gave way to a rebound in the third quarter, analysts worry fresh curbs will bring more pain to an economy expected to have slumped 6-7% in 2020 - which would be the biggest contraction in over two decades.
In December, the Bank of Thailand cut its 2021 growth forecast to 3.2% from 3.6% and some analysts have followed suit. It expects the economy to have slumped 6.6% in 2020.
CIMB Thai Bank last week slashed its 2021 growth forecast to 2.6% from 4.1%, while Tisco Group economist Thammarat Kittisiripat said he would cut his projection for this year to below 3% from 3.4% previously.
"The new wave of COVID-19 is more severe than earlier, which will disrupt the economic recovery this year," he said.
TOURISM INDUSTRY
One key concern is that the outbreak could derail government efforts to revive Thailand's tourism industry, just as the country started to reopen to foreign tourists in October.
Thailand received nearly 40 million foreign visitors in 2019, whose spending accounted for 11.4% of gross domestic product that year. The government expects just 5 million foreign tourists to visit Thailand this year, down from 6.7 million in 2020.
"Our bookings are below 20% now, compared with 80-90% during October-November... there are almost no forward bookings," said Chotchuang Surangkul, associate managing director at N.S. Travel and Tours, which runs 20 hotels across the country.
For the business to cope, company employees have had to work four days a week with 20% pay cuts since July, he added.
Thailand's automobile industry, which exports half of the car it produces, is also worried fresh restrictions will hit demand at a time when a strong baht is already hurting overseas sales. The baht has gained 10.9% against the dollar since April.
"The most important thing is confidence as people may be worried about their incomes and not want to spend," said Surapong Paisitpattanapong, spokesman of the Federation of Thai Industries' Auto Industry Club.
(Reporting by Orathai Sriring and Satawasin Staporncharnchai; Editing by Kay Johnson and Ana Nicolaci da Costa)
By Orathai Sriring and Satawasin Staporncharnchai
