Thailand’s economy faces significant downside risks and could perform below baseline forecasts, the central bank said on Monday, as the tourism-reliant nation deals with a recent jump in coronavirus infections.

Thailand’s biggest outbreak so far has seen a spike in cases and deaths this month, prompting tougher containment measures in the capital Bangkok and nine provinces from Monday.

The restrictions would have a bigger-than-expected impact on the economy, Chayawadee Chai-Anant, a senior director at the Bank of Thailand (BOT), said at an analyst meeting.

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“This policy may be more severe than expected and will likely affect economic activity more than forecast,” she said.

The prolonged outbreak and virus mutation could delay herd immunity and reopening plans and dent confidence, she said.

“It’s highly likely that the baseline (projections) will shift lower,” Chayawadee said.

Last month, the BOT cut its 2021 GDP growth forecast to 1.8 percent from 3.0 percent and the 2022 outlook to 3.9 percent from 4.7 percent, due to anticipated lower numbers of foreign tourists.

The BOT has left its benchmark rate at a record low of 0.50 percent since mid-2020 after three cuts to ease the impact of the pandemic.

Monetary policy will remain accommodative and the central bank is ready to use policy tools as necessary to ease the impact of outbreak, the BOT said.

The BOT will closely monitor the outbreak and assess whether existing measures are sufficient, said Deputy Governor Mathee Supapongse. “A combination of financial, fiscal and public heath measures should be done appropriately,” he said.

In May, the king approved a further $15.4 billion of borrowing to cope with the outbreak.

Thailand started its mass vaccination drive last month but has had limited vaccine supply. So far, 3.27 million out of Thailand’s more than 66 million people are fully vaccinated.

(Reporting by Orathai Sriring, Satawasin Staporncharnchai and Kitiphong Thaichareon; Editing by Ed Davies)

This article was written by Satawasin Staporncharnchai and Orathai Sriring from Reuters and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

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Photo Credit: Sea View Resort Hotel in Koh Chang. Thailand's economy is heavily reliant on the tourists. Thai Travel Tips / Creative Commons/Flickr