Study finds optimism rises in nearly all sectors

The Grant Thornton “International Business Report” (IBR) based on research carried out in the second quarter found a significant rise in business optimism in Thailand. 

Of 21 separate measurements, 20 increased, including revenue and profit expectations.

Only “ICT Infrastructure” dropped from the first quarter, reacting to concerns that licensing for fourth-generation cellular service would be delayed, confusion over the end of the 2G concessions of Advanced Info Service and particularly TrueMove, and discussions concerning booking revenue related to telecommunication concessions for state-owned enterprises.

Ian Pascoe, Thailand managing partner for Grant Thornton, said it was perhaps not surprising to see business optimism rise in so many categories given increased certainty. 

“Our second-quarter IBR study shows that this optimism will result in increased investments in marketing spending and projects focussed on sales effectiveness. Businesses will be looking to ensure that this initial optimism can be sustained through strong planning, determined action and a programme of investments recommended by the National Council for Peace and Order’s team of economic advisers.”

Internationally the study uncovered an unprecedented boost in plans to increase exports, driving levels of business optimism to record highs. The growth in business optimism is particularly high in Europe and North America, and seems to be driven by increasing export-growth expectations. The findings highlight the need for policy-makers to work together to lower trade barriers and foster business environments, which encourage cross-border activity and bolster the global recovery.

The IBR has found that globally, business optimism has risen to a net 46 per cent, a record high. The surge in optimism is being driven by increasing confidence in the European Union (at 43 per cent, the highest since 2006), North America (at 73 per cent, the highest since 2004) and the Group of Seven (at 53 per cent, another record high). 

This positive sentiment about the economic outlook is being fed by record-high expectations over exports; globally the proportion of businesses expecting exports to increase over the coming 12 months (24 per cent) has only been equalled once before, in 2011. In the G7, a record 23 per cent of businesses expect to grow exports over the next 12 months.

“The widespread expectation for export growth is welcome, as it is feeding levels of business confidence we have not seen in more than a decade,” Pascoe said. “As economies continue to recover from the financial crisis, business leaders are sensing real opportunities to go overseas and capitalise on other markets. 

“Growing middle classes in Asia are creating new and expanding markets for goods from advanced economies, and the rise of technology at home and in the workplace is feeding demand for cutting-edge products and services. 

 

Exciting times 

“These are exciting times for business leaders, and the focus on exports is a clear sign to policy-makers that cross-border trade is critical to the long-term health and success of their operations and the wider economy.” 

Expectations for increasing exports are particularly strong in the Asia-Pacific region (27 per cent), where businesses in China are particularly bullish about selling more overseas (36 per cent), and Europe (31 per cent), where Germany (47 per cent) and the UK (34 per cent) are among the most confident both with regards to their respective economies and their export growth potential. Expected export growth in southern Europe (32 per cent) is also notable, with businesses in Spain (40 per cent) and Greece (38 per cent) in the top five most confident about growing exports globally.

Pascoe said exporting is a particular focus for Europe at the moment; regional growth remains tepid at best, so businesses are increasingly looking further afield. Big German brands, particularly those in the automotive sector, recognised the potential in high-growth markets such as China long ago, but businesses in Spain, the UK and elsewhere are following their lead.

He added that for policy-makers, the message is loud and clear that businesses need to be able to export in order to fuel growth and recovery. At a World Trade Organisation meeting in Bali last December, landmark commitments were made to boost trade around the world by breaking down bureaucracy and simplifying procedures for doing business across borders. This was a positive step, one that could add an estimated US$1 trillion to world trade, and he hopes to see further progress on the Trans-Pacific and Trans-Atlantic trade partnerships in the months ahead.  

Tied to the growth in business optimism and intentions to export is a growth in plans to increase spending on research and development. Globally, 28 per cent of business leaders plan to increase R&D spending over the next year, the highest figure ever recorded. Over the last quarter, R&D expectations have increased by 13 percentage points in the Asia-Pacific region, 5 points in the EU, 7 in North America and 6 in Southeast Asia.

The Grant Thornton IBR provides insight into the views and expectations of more than 12,500 businesses per year across 44 economies. It is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 2,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors in 34 economies and were conducted in May.