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» The Business Confidence Index slightly increased 2 point In the Second Quarter of 2023.

1st August 2023, Siam Ratings Agency Company Limited (SRA) announced the result of the survey about WVB Business Confidence Index in the Second quarter of 2023.

SRA Co., Ltd. conducts the survey quarterly. The main objects of the survey are companies which have the most well-known brand, the largest number of Total Assets, Total Revenues, and Employees. Being performed from the early of July 2023 to the late of July 2023, the survey attracted 150 Companies which active in many different fields in Thailand, such as Agriculture, Automotive, Construction, Technology, Energy, Electronics, Telecommunications, Services… In particular, large and medium enterprises accounted for over 91% of total enterprises participating in this quarter.

According to the survey, the Business Confidence Index (BCI) in the Second quarter of 2023 reached 132 points, slightly increased by 2 point compared to the First quarter of 2023 (130 points), This index shows that companies in Thailand have a positive perspective on the current economic situation, which most companies also say they are still confident that the Thai economy will improve in the next phase. Besides, there are also many enterprises that believe the current economy has many fluctuations and it is difficult to predict due to the volatility of the global economy.

Summary of investigation results of 6 components building Business Confidence Index (BCI) in the Second quarter of 2023 as follows:

On the general economic situation of Thailand today:

Only 48.00% of enterprises participating in the survey said that Thailand's overall economy is now better than 12 months ago, 39.33% of enterprises said that the economic conditions of Thailand remained the same. 12.67% of enterprises said that economic conditions were somewhat worse than 12 months ago.

According to the Shareholder Newsletter from Kasikorn Research Center (KResearch), Global economy continues to slow down and will face high uncertainty ahead despite the robust recovery momentum seen in the Chinese economy after abandoning of its Zero-COVID policy.

Western economies are set to slow down in 2023 due to the impacts of persistently high inflation and the implementation of their tight monetary policies over recent years. Additionally, there are lingering uncertainties seen in the stability of the banking sector. In 1Q2023, the US economy grew at an annualized rate of 1.1 percent QoQ, which was below our prior estimate. Despite accelerating domestic consumption, the US economy was undermined by the decline in inventories of various businesses as demand is projected to weaken in 2023 due to the rising borrowing costs. At the latest Federal Open Market Committee meeting in May 2023, the US Federal Reserve (Fed) raised its policy rate by 0.25 percent to 5.00 - 5.25 percent, as expected. Although the FOMC statement signaled that the Fed may pause its rate increase, Fed Chair Jerome Powell still left the door open for future rate hikes if needed while viewing that rate cuts may not happen within 2023. However, if interest rates remain at elevated levels for a longer period of time, while loan approval criteria become more stringent, it is expected the US economy will contract in some quarters of 2023. Meanwhile, the Eurozone economy is still reeling from elevated inflation (at 7.0 percent YoY in April 2023). The protracted conflict between Russia and Ukraine will continue to present an inflation risk within the Eurozone. As a result, the European Central Bank (ECB) continues to signal its policy rate hikes. Amid such downside risks, it is expected that the US and Eurozone economies will decline substantially during 2023 although they will continue to record growth to a certain extent.

Meanwhile, the global economy will be driven primarily by China’s robust economic recovery following the lifting of its COVID-19 restrictions at the beginning of 2023. In 1Q2023, the Chinese economy grew 4.5 percent YoY, which was better than that reported in the preceding quarter. Nevertheless, China’s economic recovery will continue to face a number of challenges due to internal factors such as problems in the real estate sector, unemployment seen among new graduates, and higher public debt of local governments. Additionally, external factors, including the global economic slowdown and the US-China supply chain decoupling may inhibit China’s economic recovery. In spite of this, China may introduce additional monetary and fiscal stimulus measures, aimed at bolstering economic growth in the country. As a result, its economy is projected to expand at around 5.2 percent in 2023, which would be higher than its set target of 5.0 percent.

Prediction of Thailand general economic situation in the next 12 months:

63.33.00% of enterprises believed that Thailand’s economy would be better in the next 12 months, 36.67% said that the economy would remain unchanged, and 0.00% of businesses are worried about Thailand’s economy in the future.

According to the Shareholder Newsletter from Kasikorn Research Center (KResearch), Tourism remains Thailand’s key economic driver in 2023, but exports will continue to face challenges resulting from the global economic slowdown amid several risks in the country, including uncertainty surrounding the formation of a new government.

The Thai economy is projected to record steady growth in 2023, supported by the robust recovery in tourism. In 1Q2023, the number of international tourist arrivals in Thailand reached 6.48 million, an increase of around 1,202 percent YoY. KResearch is of the view that the number of foreign holidaymakers in Thailand will reach roughly 28.5 million during 2023, helping generate income of about Baht 1.33 trillion for the country. The major factor supporting Thai tourism is the resumption of the arrival of Chinese tourists. It is expected that about 50 percent of those visiting Thailand in 2019 will return to Thailand in 2023 after Beijing lifted its international COVID-19 travel restrictions and allowed Chinese tourists in the form of group tours to visit Thailand in early 2023. The number of Chinese tourist arrivals in Thailand began to accelerate in 2Q2023 and is projected to increase substantially during 2H2023 in line with the route expansion and increased flight frequency of many airlines, including marketing drives of tourism-related agencies and operators.

However, Thailand’s economic recovery still faces many challenges. Private consumption will likely be pressured by elevated commodity prices and financial costs. Although inflation in Thailand has begun to ease, KResearch views that it will likely be driven by high electricity and cooking gas bills, plus uncertainty surrounding the cost transfer of manufacturers to consumers. Given this, KResearch maintains our headline inflation forecast at the rate of 2.8 percent on average for 2023 as we are of the view that inflation may slip below 3.0 percent in subsequent quarters due to the high base of 2022, based on the assumption that the average Dubai crude oil prices may stand at USD 80 per barrel in 2023. Additionally, internal factors, including uncertainty towards the formation of a new government, may affect the government’s budgetary disbursements in 4Q2023. The Thai economy may also be threatened by several external factors, including an uncertain global economic outlook amid ongoing geopolitical conflicts, volatile commodity prices, tightening monetary policy stances of leading central banks and problems in the banking sector of various Western countries despite being supported by the Chinese economic recovery. Such external factors may adversely affect Thailand’s international trade sector, particularly exports. KResearch is of the view that the overall Thai exports may contract 1.2 percent in 2023.

In summary, as tourism will continue to be the main driver of the Thai economy ahead while there are lingering risks seen in the global economic downturn and uncertainty surrounding the formation of a new Thai government, we at KResearch have decided to maintain our 2023 growth forecast for the Thai economy at 3.7 percent.

Plans to use employees:

In the survey: 50.00% of enterprises expected to raise human resources; 48.00% of enterprises planned to remain and 2.00% of enterprises will reduce the number of employees in the future.

According to The National Economic and Social Development Council of Thailand (NESDC), Labor in the Social Security System: The total number of insured persons in the social security system continued to increase for the eighth consecutive quarter. Whereas, the unemployment rate among Insured persons under article 33 was higher than the previous quarter but lower than the same quarter of the previous year.

The total number of social security beneficiaries continued to increase for the eighth consecutive quarter by 2.3 percent. This was mainly attributed to (i) a continuing increase in compulsory insured person under article 33 by 4.1 percent, compared to a 4.5-percent growth in the previous quarter. This was in accordance with an increase in insured persons in the industrial and service sectors (such as accommodation and food service activities, wholesale and retail trade; repair of motor vehicles and motorcycles and manufacturing sector), and (ii) an increase in voluntarily insured persons under article 40 by 1.3 percent, comparing with a 2.0-percent increase in the previous quarter. Meanwhile, voluntarily insured persons under article 39 continued to decrease for the third consecutive quarter by 2.8 percent. The unemployment rate among insured person under article 33 in this quarter was at 1.9 percent, higher than 1.7 percent in the previous quarter but lower than 2.7 percent in the same quarter last year. The average number of unemployed was at 227 thousand people, higher than 197 thousand people in the previous quarter but lower than 306 thousand people in the same quarter last year.

Investment plans for fixed assets:

68.67% of surveyed businesses planned to invest more costs for fixed assets, 30.00% of these still have no plan and 1.33% planned to reduce the cost for fixed assets in the next 12 months.

The belief in revenue growth:

76.67% of participating enterprises were confident of an increase in sales, 22.00% of enterprises said that the revenue would remain and 1.33% business is concerned about the number of sales going down in the next 12 months.

The belief in profit growth:

76.67% of enterprises believed that profit would rise in the following year, 22.00% of enterprises believed that profit would remain and 1.33% business is concerned about the number of Profit going down in the next 12 months.

According to The National Economic and Social Development Council of Thailand (NESDC), The Thai Economic Outlook 2023.

The Thai economy in 2023 is expected to accelerate from 2022, supported mainly by the recovery of the tourism sector, favorable growth of private consumption and the continued expansion of both private and public investment. However, the economy during the remaining of 2023 is likely to face significant limitations and risks stemming from slower-than-expected global economy amid a protracted geopolitical conflict and volatility in global financial markets, which will hurt Thai exports and manufacturing sectors.

In addition, financial conditions of households and businesses continued to constrain a recovery of domestic demand, especially during the interest rates uptrend. Moreover, risks from climate variability may hinder agricultural production, while the political and economic conditions after the general election could affect economic confidence and delay of the FY2024 government annual budgetary process.

Supporting factors for the economic growth:

The recovery of the tourism sector due to a continuously increasing number of both international and domestic tourists, specifically Chinese tourists after the border reopening since January 8th, 2023. This resulted in an influx of Chinese tourists up to 328,375 persons in April 2023, or a 3,662.3-percent improvement from the same period of last year. In total, the number of Chinese tourists during January – April 2023 reached 845,645 persons, in line with resurging outbound Chinese tourists, and the fact that Thailand is the top destinations for Chinese tourists. Hence, the number of Chinese tourists is expected to increase significantly in the latter half of 2023. This is also coupled with an increasing number of foreign tourists from other countries of origin including India, South Korea, and Russia, which has nearly reached the pre-pandemic level, as well as normalizing trend of ASEAN tourists. Meanwhile, a recovery of inbound tourists is also in accordance with an upward trend of international flights. The figure of international flight during the first quarter of 2023 is 80,919 flights, compared with 26,554 flights in the same period of 2022. This is consistent with the projection of the United Nations World Tourism Organization (UNWTO) that the number of global tourists in 2023 will be approximately 1 billion persons, increasing by 71 percent compared to the previous year. In terms of domestic tourism, the number of Thai tourists continues to increase, illustrated by the figure in the first quarter of 2023 that reached 62,588,050 persons-times, compared with 46,047,025 persons-time in the same period last year. Moreover, the tourism sector over the rest of the year will be driven by key government’s stimulus package i.e., ‘We Travel Together Phase 5” during March 7th – April 30th, 2023, and “Unseen New Series” from the Tourism Authority of Thailand aiming to support secondary provinces.

The continued expansion of domestic consumption, consistent with resumption of economic activities and household consumption, together with the strong rebound of tourism sector. As a result, the consumer confidence index, regarding the overall economy, in April 2023, rose to 49.4 point, the highest level in 38 months. In addition, domestic consumption would also be supported by strong labor market that has recovered to the pre-pandemic level, with the unemployment rate, in the first quarter of 2023, of 1.05 percent, comparing with 1.15 percent in the previous quarter, which was the lowest level in 12 quarters and close to 0.99 percent in the same quarter of 2019. Domestic consumption will also be supported by the continuous expansion of farm income owing to continual growing agricultural products.

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