2019 was a challenging year for both the global economy and the Thai economy. On the world stage, confidence in markets waned due to the ongoing US-China trade war and slowing economic growth in key countries around the world, including China, India, and in the EU. In Thailand, the combination of export woes, decreased tourism, the strong baht, the looming loss of US tariff privileges, and concern over global market instability all contributed to the Kingdom’s 2019 economic growth falling short of the 3% target.
Near the end of 2019, Grant Thornton released its latest International Business Report, summarising the views of business leaders across Thailand and around the world. What we found is that overall, businesses in Thailand are becoming moderately more optimistic than they used to be about the opportunities ahead. However, there is still much room for improvement on this score, as Thailand ranks 21st out of the 33 countries surveyed. The key issue for many business leaders seems to be the economic uncertainty that they still face.
The outlook for the Thai economy in 2020
Forecasts for the 2020 economy are far from rosy. The Kasikorn Research Center predicts that the GDP will grow by 2.5-3% in 2020, compared to the 2019 growth of 2.8%.
The strong baht remains a major cause for concern, as it dampens exports and discourages tourism. Yet many of Thailand’s economic struggles stem from external factors that are out of its control. Economic slowdown in China has reduced the number of Chinese tourists flocking to Thailand, while ripple effects from the US-China trade war also significantly strain Thailand’s export economy.
Thailand’s economic prospects could be greatly improved with a successful conclusion of negotiations on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as well as the Regional Comprehensive Economic Partnership. These agreements, along with a new free trade agreement with the EU, could be a substantial boon to the Thai economy, as long as they avoid pitfalls such as non-tariff barriers.
Moreover, now that Brexit is all but assured with the recent election victory of Prime Minster Boris Johnson’s Conservatives, Thailand is already exploring the possibility of a free trade agreement with a post-Brexit UK.
Whether or not these free trade agreements come to fruition, the business landscape within Thailand’s borders is expected to remain at least somewhat precarious in the near term.
What can businesses do?
Ultimately, the success of businesses in Thailand will depend on their own initiative, resiliency, and agility.
The uncertain climate could provide an excellent opportunity for new start-ups to challenge established businesses by utilising cutting edge technologies and low overheads.
Mature businesses may decide to temporarily turn their focus away from growth, and find ways to reduce overhead costs through internal development and re-structuring. This strategy allows them to wait for the economy to improve, while putting themselves in a better position to capitalise on opportunities when they do arrive.
The key challenge with this strategy is in the ability to recognise these new opportunities quickly. But by seeking out expert advice, and studying the significance of recent developments in markets and technology, businesses can act quickly to take advantage of promising conditions as they arise.
Whether the company is a start-up, a mid-market company, or a large corporation, success in the Thai economy of 2020 will depend on its ability to serve customers well. Businesses that focus their efforts on client development and retention will be better able to deal with the challenges of 2020, thereby putting themselves in better position to grow rapidly once the economy takes a positive turn.