Thai service sector stalls on foreign investment, tech barriers
Thailand’s main economic engine, the service sector, has stalled due to Covid-19 and barriers to foreign investment, according to a three-year forecast of industry trends by Krungsri Research.
The global trend for economic growth is shifting away from manufacturing towards services, which rose to 64.3 per cent of global GDP in 2019.
But in Thailand that figure is just 58.3 per cent, signalling room for expansion, said KResearch.
The problem is that Thailand is dominated by traditional services, which have fewer value-added sectors including tourism, trade, hotels and restaurants.
In contrast, the US and UK’s service sector is led by modern businesses like IT software and financial services and accounts for about 75 per cent of GDP.
KResearch said that to expand in the same way, Thai service providers must tap technological advancements – for example online platforms and surgical robots.
It noted that Thailand’s industrial sector is already using innovations such as artificial intelligence and big data to increase sales and design new products that meet consumer needs. As consumer demand becomes more focused, the service sector will play a greater role in the Thai production chain, KResearch forecast.
However, it warned that raising Thailand’s service sector to match developed countries may be slow because of Covid-19’s heavy impact on hotels, restaurants, real estate and construction. Meanwhile Thailand also suffers from a large number of regulations and policies hindering foreign investment in the service sector compared to developed countries, KResearch said.
Thailand ranked 46th out of 48 countries in the World Bank’s Services Trade Restriction Index in 2020. Entry of foreign capital and technology is therefore limited. This is a challenging factor for Thai businesses looking to modernise their services amid slow economic growth.
‘Globe to grow 4% per year’
KResearch projects the global economy will grow 4 per cent per year over the next three years, down from 5.9 per cent in 2021, as the world recovers from Covid-19.
The US economy is projected to grow at an average of 3 per cent per year, driven by its $1.2-trillion infrastructure investment plan.
The euro zone economy is projected to grow at an average of 2.6 per cent annually, driven mainly by consumption, investment and tourism.
The Japanese economy is likely to expand by an average of 1.8 per cent per year, said KResearch.
The Chinese economy is expected to grow at an average of 5.4 per cent per year.