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Business optimism in Thailand sinks to lowest level since 2011

November 26, 2013 Destination Thailand No Comments Email Email

Thai businesses are scaling back their growth expectations for the year ahead. These are the key findings from Focus on: Thailand , the latest research from the Grant Thornton International Business Report (IBR) which surveys more than 3,300 business leaders in 45 economies every quarter.

The report finds that business optimism in Thailand sank to its lowest level since the 2011 ฿oods, dropping to net -28% in Q3-2013 – meaning more business leaders are pessimistic than are optimistic for the economy over the next 12 months – down from 22% the previous quarter.

Concerns about the wider macro-economy are being reflected in the reaction to business growth prospects. Net 31% of Thai businesses expect revenues to rise over the next 12 months, but -10% expect profits to rise. Export prospects remain depressed with just net 2% of business leaders expecting an increase, the same as Q2, and down from an average of 17% in 2012. The proportion of businesses planning to increase investment in plant and machinery has also dropped, declining from 18% in Q2 to just 4% in Q3.

Ian Pascoe, Managing Partner of Grant Thornton said: “The Thai economy has been through a marked transition in 2013. Exports are depressed with growth of just 1% forecasted. The increase in the minimum wage, very low unemployment, a change in global consumption towards higher-technology goods, continued protectionism in some of the service industries, the ill-conceived rice pledging scheme and persistently low productivity all weigh heavily on Thailand’s competitiveness.”

“Externally however, things look brighter and growth is expected to pick up in 2014. The economies of Thailand’s major trading partners are performing strongly and tourism remains buoyant. Furthermore, as the stimulus policies are wound back we should see consumer confidence increase, boosting the demand-side. The supply-side should be supported by the cut in corporation tax and massive infrastructure investments.”

Focus on: Thailand also reports on a worrying talent shortage that the World Bank recently reported has become the biggest impediment to doing business in Thailand. With just 300,000 people unemployed – 0.8% of the workforce – average wages rose by around 50% in the decade to 2010. More than 50% of businesses in Thailand cite a lack of skilled workers as a constraint on their expansion plans, ten percentage points higher than the ASEAN average (42%) where unemployment rates are higher.

Ian Pascoe continued: “We expect growth to improve, especially in the second half of 2014, however we are more cautious than the Bank of Thailand as we look at the balance of headwinds and tailwinds for the economy. Our prediction is for growth of less than or equal to 4.5% for 2014.”

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