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5 sectors ‘face tough year’

Dec 16. 2015
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By Sucheera Pinijparakarn

The

The shrimp, petrochemical, automobile, hypermarket, and residential and hotel business sectors are all expected to face further difficult challenges next year, according to Kasikorn Research Centre.

 

KResearch yesterday gave its latest assessment of the likely trend for the Thai economy in 2016, in which it maintained its view that gross domestic product would expand by 3 per cent, against an estimated 2.8 per cent this year.

The research house said the signs for private consumption were positive in the current quarter, which was promising for domestic growth next year.

However, five business sectors in particular are expected to face further tough challenges in the year ahead.

It cited shrimp farming in particular, as the Thai fishery sector is at risk of being given a "red card" by the European Union under its illegal, unreported and unregulated (IUU) fishing regulations.

In the event of a red card, Thailand’s global shrimp exports next year could fall by 7.7 per cent, said Kevalin Wangpichayasuk, assistant managing director of KResearch.

However, even if the Kingdom’s fishing industry is maintained by the EU at the current yellow-card IUU status, the research house expects shrimp exports to witness a further decline in 2016, which would be the fifth year in a row that they had fallen.

Thai shrimp exports to all markets this year are expected to come in at around US$1.8 billion (Bt65 billion), which would be a decline of 9.8 per cent from last year’s level. Exports were down 5 per cent in 2014.

The petrochemical industry, meanwhile, will continue to be affected by the plunge in crude-oil prices, with its profitability coming under more pressure next year.

However, companies in the sector are generally strong and most can use their diversified operations to reduce the impact of very low oil prices, Kevalin said.

Meanwhile, weak purchasing power is still putting pressure on domestic car sales, with automakers having to carry out promotions to secure customers.

Yet this sector can also diversify its risk, by transferring more activity to exports during a period of domestic-market weakness, she said. Weak consumption among low-to-mid-income consumers will also affect on hypermarket business, which is expected to grow by just 3 per cent next year, against 7-9 per cent annually over the past few years.

The residential and hotel property sector also faces stiff challenges over the next 12 months, she said.

While the government’s measures to help the residential segment can help balance supply and demand, economic uncertainty and the slowdown of consumption will cause property developers to be more cautious about launching new projects in 2016.

Meanwhile, hotel operators are expected to face fierce competition because Chinese tourists – the main source of visitors to Thailand – are increasingly being lured by other countries as well.

Moreover, uncertainty over terrorism is a negative factor for hotel business, she said.

Pimonwan Mahujchariyawong, deputy managing director of KResearch, added that Thai economic growth next year would depend more on private investment than on tourism and government investment.

Tourism and government spending this year is contributing 2.9 per cent to GDP, but KResearch expects the contribution to fall to 1 per cent next year.

Private investment should be the key driver of GDP growth in 2016, led by Board of Investment-approved projects, logistics and property businesses that are investing in line with the government’s infrastructure projects, and investment in the fourth-generation mobile network, he said.

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