Thailand's business optimism down, reversing trend
Business optimism in Thailand declined sharply in the second quarter of this year, despite an increase in emerging Asia Pacific countries driven by improvement in China, according to a survey.
The optimism in Thailand slid from 36 per cent in the first quarter to 10 per cent in the second quarter, according to the Grant Thornton International Business Report (IBR), a quarterly global survey of 2,580 business leaders.
Affecting this pessimism during the quarter were immediate issues around the fishing industry, the Thai aviation industry, potential drought in the central region, and the slowing economies of major trading partners. In this regard business leaders in Thailand cited a lack of growth initiatives as a major source of concern.
Andrew McBean, Partner at Grant Thornton in Thailand and specialist in Asean markets commented: “In Thailand we are struggling to find many reasons for optimism at the moment. The government’s focus is more towards stability over prosperity however it could be argued that this focus has at least arrested severe economic turbulence in recent years and they are trying to deal with significant systemic issues which had not been tackled for many years. The tumbling global commodity prices have hit the outlook for Malaysia, which is one of the world's largest suppliers of liquefied natural gas.”
Business optimism in emerging Asia Pacific rose from 43 per cent in the first quarter to 52 per cent in the second quarter, driven by a rise of 12 percentage points in China (46 per cent). Elsewhere, India (85 per cent), Philippines (78 per cent) and Indonesia (60 per cent) fell back slightly, although all remain in the global top ten.
“Rising sentiment in China should be good for the rest of the region if the markets can find stability, especially if Chinese consumers start demanding more imports as the economy rebalances. China is also looking for places out of China to invest their money and Thailand may benefit from this. India has enacted some encouraging reforms but more needs to be done in terms of job creation if it is to benefit from its demographic dividend. Indonesia too has benefitted from falling oil prices but much of its infrastructure remains deficient, hindering business growth," McBean said.
A shortage of skilled workers remains a problem across the region. Just over a third of businesses leaders cite a lack of talent as a constraint on their growth prospects (36 per cent), well above the global average (29 per cent). Businesses in India (64 per cent) and Philippines (44 per cent) are particularly concerned.
“Demographics have a big part to play in the outlook for the region. China is facing an ageing population and a slowdown in the migration of workers to cities. India's population is relatively young but businesses are complaining about a lack of skills which is a worry.Thailand particularly is running at very close to zero unemployment and has a rapidly aging population so weneed to get workers from abroad however our immigration policies are not aligned with this need. We can expect some real challenges in the medium term because of this.”
Global business optimism climbed 12 percentage points to net 45 per cent in the second quarter with many of the world's largest economies posting significant improvements. Optimism in the United States, where businesses have been adding jobs rapidly, rose 11pp to 54 per cent, and in Japan from -17 per cent to 8 per cent. In Europe, business confidence rose for the fourth straight quarter to 58 per cent.
