International Business Report: Thailand Shows Exceptional Economic Health Moving Forward

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Bangkok, Thailand, September 2023 — The Grant Thornton International Business Report (IBR) for H1 2023 shows dramatic improvements in economic conditions and positive sentiment for the private sector, both globally and for Thailand in particular as inflation concerns recede. The biannual report compiles detailed surveys and interviews among mid-market businesses, providing analysis of expected trends and business conditions for the subsequent 12-month period.

The new H1 2023 IBR is especially significant, as it indicates a clear expectation among business leaders of full-throated, post-pandemic growth across industries — a long-awaited development that had been delayed repeatedly in recent years amid geopolitical issues such as the war in Ukraine and the downturn of China, as well as new waves of infections.


Switching gears

At a global level, scores for mid-market business health rose to 3.1% during the current period, an encouraging increase for the worldwide economy as this number had been in negative territory just six months prior. For Asia-Pacific, self-reported mid-market business health is at 0.5%, up from -2.8% in the previous report. (Scores are determined by a weighted sum of positive and negative responses that falls within the range of -50 to +50.)

Encouraging as these numbers are, ASEAN and Thailand both reported even higher rates of improvement across indicators as well as higher overall totals. ASEAN’s current business health score is now at 9.9%, with Thailand’s at an excellent 14.3%. This score from Thailand represents an impressive 5.5 percentage point increase over the previous period, reflecting an improved climate for investment, better economic conditions, and an especially sharp increase in overall business optimism, as indicated by the data.

At the same time, mid-market businesses in Thailand see both supply constraints and demand constraints as less significant obstacles now than they were six months previously, improving by 2 and 6 percentage points respectively. The easing of inflation likely contributed to an improved perception of demand constraints during this period.


Drivers of growth

A closer look at the survey responses from Thai businesses tells an interesting story. Contrary to the heightened improvement in business health, the percentage of businesses expecting an increase in exports over the coming 12-month period has been on a consistent downward trend of late — from a 64% score in H1 2022, to 54% in H2 2022, to 46% in H1 2023. This decrease puts the country’s export scores at a lower level than both the regional average and the world as a whole.

Yet during the same period, Thailand’s revenue scores are up (from 64% a year ago to 73% now), profitability expectations are higher (from 68% to 82%), and economic optimism likewise follows a similar trend (from 58% to 72%). Employment scores are also up (36% then, 52% now); as are those for investment in staff skills (from 48% to 59%), and investment in IT (from 49% to 60%), although, with neighbouring countries growing increasingly competitive, ASEAN averages remain higher than Thailand’s scores in these areas. 

A big part of the explanation for these diverging trends can be found in the rising number of tourists entering the country. Tourist arrivals form a tide that lifts many boats in Thailand, enabling business growth even without a corresponding increase in exports.

Moreover, increased private consumption in Thailand driven by a rising middle class, along with investment in S-curve industries, and major projects such as One Bangkok, U-Tapao Airport Expansion, and the Eastern Economic Corridor (EEC) will also help to bolster and sustain healthy economic activity within the country. In time, some of these projects could give a much-needed boost to Thailand’s export economy as well as attract greater foreign investment.


Clearing the obstacles

Overall economic uncertainty remained the most frequently cited obstacle to growth in Thailand, scoring at 50% overall (slightly worse than in the previous period). Political uncertainty is likely a key factor here, alongside increasing competitive pressures from neighbouring countries. The forming of the new government should help to remove some of that uncertainty. 

Other constraints on mid-market business growth in Thailand include energy costs (44%), and regulation / red tape (32%). Of less concern was the availability of skilled workers (24%), although this indicator will be worth revisiting later as the country’s demographic shift toward an ageing society continues apace.

The H1 2023 IBR is based on approximately 5,000 surveys and interviews (including 100 in Thailand) with mid-market business leaders, conducted from May to June of this year. We would like to thank Oxford Economics for their assistance in analysing the data from this report.