In a remarkable turn of events, the H1 2023 edition of the Grant Thornton International Business Report (IBR) has unveiled a resounding upswing in economic conditions worldwide, coupled with a wave of optimism within the private sector. Thailand, in particular, emerges as a shining beacon of hope as inflation concerns recede. This biannual report, a compilation of exhaustive surveys and interviews conducted among mid-market businesses, provides invaluable insights into anticipated trends and business landscapes for the next year.
The H1 2023 IBR holds exceptional significance, heralding a palpable expectation among business leaders of a robust post-pandemic resurgence across various industries. This rekindled optimism comes as a welcome relief following years of delays attributed to geopolitical turmoil, including the Ukrainian conflict, China’s economic downturn, and successive waves of infections.
Global Revival: Mid-Market Businesses on the Rise
At the global level, mid-market business health has soared by 3.1% during the current period, marking an encouraging rebound for the world economy from a previous stint in negative territory just six months ago. Meanwhile, in the Asia-Pacific region, self-reported mid-market business health has climbed to 0.5%, a stark improvement from the -2.8% reported in the previous IBR. (Scores are computed via a weighted sum of positive and negative responses, falling within the range of -50 to +50.)
Notably, the ASEAN region and Thailand have reported even more impressive gains across various indicators, securing higher overall scores. ASEAN’s business health score stands at a remarkable 9.9%, with Thailand achieving an outstanding 14.3%. Thailand’s score reflects a remarkable 5.5 percentage point surge over the preceding period, underscoring an enhanced investment climate, improved economic conditions, and a particularly sharp uptick in overall business optimism.
Supply and demand constraints, once formidable hurdles for mid-market businesses in Thailand, have become less daunting in the past six months, improving by 2 and 6 percentage points, respectively. The alleviation of inflation concerns has likely played a pivotal role in enhancing perceptions of demand constraints during this period.
Unpacking Thailand’s Business Landscape
A closer examination of survey responses from Thai businesses reveals a compelling narrative. Despite the notable improvement in business health, the proportion of businesses anticipating an increase in exports over the next 12 months has exhibited a consistent downward trajectory. This decline has seen figures drop from 64% in H1 2022 to 54% in H2 2022 and further to 46% in H1 2023, positioning Thailand’s export expectations below both the regional average and the global norm.
However, during the same period, Thailand has witnessed gains in revenue scores (from 64% a year ago to 73%), heightened profitability expectations (from 68% to 82%), and a parallel surge in economic optimism (from 58% to 72%). Employment scores have also surged (from 36% to 52%), along with investment in staff skills (from 48% to 59%) and investment in IT (from 49% to 60%). Nonetheless, it is worth noting that neighboring ASEAN countries maintain a competitive edge in these areas.
A substantial portion of the explanation for these divergent trends can be attributed to the rising influx of tourists into the country. Tourist arrivals act as a catalyst for growth in Thailand, bolstering business activity even without a corresponding uptick in exports.
Furthermore, increased private consumption in Thailand, driven by a burgeoning middle class, coupled with investments in S-curve industries and ambitious projects such as One Bangkok, U-Tapao Airport Expansion, and the Eastern Economic Corridor (EEC), are poised to sustain healthy economic activity within the nation. Over time, these initiatives may serve as a catalyst for Thailand’s export economy and garner increased foreign investments.
Navigating Challenges Ahead
Despite the promising landscape, economic uncertainty remains a prevalent obstacle to growth in Thailand, scoring at 50% overall, slightly worse than in the previous period. Political uncertainties and mounting competitive pressures from neighboring nations are likely contributing factors, and the formation of a new government is expected to address some of these concerns.
Additional constraints on mid-market business growth in Thailand include energy costs (44%) and regulatory hurdles (32%). The availability of skilled workers, while less worrisome, stands at 24%, an indicator worthy of reevaluation as Thailand continues its demographic shift towards an aging society.
The H1 2023 IBR draws insights from approximately 5,000 surveys and interviews, including 100 conducted in Thailand, with mid-market business leaders. These data were collected from May to June of the current year, with gratitude extended to Oxford Economics for their invaluable contributions to the analysis of this report.