A senior official with the University of the Thai Chamber of Commerce (UTCC) has warned that the loss of small and medium-sized firms by even up to 5% could see millions of more jobs lost as a survey by the body highlights a growing liquidity crisis on the ground with businesses struggling to participate in the country’s economic recovery. New lockdown may be on the cards.

The Omicron virus variant in the last 24 hours has cast uncertainty over what was already a fragile economic recovery in Thailand. The virus which is reported as highly transmissible is being detected in more countries worldwide. However, even before this unwelcome and potentially disastrous development, the country’s small and medium-sized business sector has been reporting a credit crunch as firms struggle to find cash flow to fund their operations. A business survey of 625 firms by the University of the Thai Chamber of Commerce (UTCC) conducted in mid-November has confirmed a growing liquidity crisis as many businesses struggle with lower profits, customer numbers and rising costs driven by inflationary pressures. An area of key concern for the Thai economy according to one of the coordinators of this extensive ‘Business Status’ survey is the country’s nightlife industry which has a significant and underestimated impact on the overall foreign tourism sector. Deputy Minister of Public Health, Satit Pitutacha, made it clear on Wednesday that any proposed reopening of that industry, scheduled for January 22nd 2022, has now been made questionable by the Omicron situation.

Minister of Finance Arkhom Termpittayapaisith, speaking on Tuesday, outlined a conservative approach to government support for the economy in 2022 and touted the kingdom’s drive to recruit 1 million foreigners to live and work from Thailand as a way forward for the country. Fears over the Omicron virus variant on Wednesday, including bad news from South Africa, are now threatening to overshadow the country’s fragile economic recovery effort. A survey in mid-November has shown that this is also threatened with a severe liquidity or cash flow crisis developing among the kingdom’s small and medium-sized business concerns.

There are growing concerns about the threat posed by the Omicron variant of the virus with reports from South Africa in the last 24 hours that hospitalisations in the past few weeks in Gauteng province have spiked by 330%.

This has been attributed by South Africa’s health minister Joe Phaahla to the more infectious virus strain.

Government intensely monitoring the situation both within and without the kingdom concerning Omicron

On Wednesday, Deputy Minister of Public Health Satit Pitutacha explained that the Thai government was intensively monitoring the situation including up to date assessments of events worldwide.

He confirmed that the virus has not yet reached Thailand.

It is understood that the Prime Minister is being briefed regularly by security agencies and a special team of officials. 

Particular attention is being paid to the country’s porous borders which have, in the past, contributed to new outbreaks of the disease.

‘The situation will be monitored closely. Measures will be reviewed based on new information coming in. If the Omicron strain is found in Thailand, the country will have to face another lockdown,’ Mr Sathit said. ‘It is the prime minister’s policy and he will make a quick decision as director of the Centre for Covid-19 Situation Administration (CCSA).’

Stock Exchange plunged on Tuesday

News of rising concern about the Omicron variant caused the Stock Exchange of Thailand (SET) to plunge by 1.32 % on Tuesday as uncertainty over the economic implications of the new virus strain is being assessed by investors.

At the Bank of Thailand, Chayawadee Chai-Anant, the bank’s senior director for corporate communications, noted that the world is responding to this latest virus variant at a quicker pace and that the World Health Organisation (WHO) and other scientific bodies could still take weeks to assess the real threat posed by it.

In the meantime, the bank would continuously assess the country’s fragile economic recovery which saw consumer confidence in October rise by a slower pace of 1.6% from a 5.6% lift in September. Exports also advanced by 2.2% in September and 1.3% in October.

Bank’s Monetary Policy Committee in December will appraise the situation after the potential impact of Omicron is better understood in the coming weeks

She indicated that the bank’s Monetary Policy Committee would make a clearer assessment of the economy at its December meeting and that the impact of the Omicron variant would be clearer at that point.

Arkhom Termpittayapaisith, the Minister of Finance on Tuesday reaffirmed the government’s commitment to pursuing the revitalisation of the country’s economy which he said had picked up since the reopening to foreign tourism on November 1st.

He underlined the importance of getting people in Thailand back to work and the need for people to have confidence again to travel within the kingdom to boost the domestic tourism sector.

Government’s ambitious programme to attract 1 million high net worth foreigners is going ahead

Mr Arkom also mentioned the government’s programme to attract high net worth individuals to come to live and work in Thailand to boost investment and money circulating within the economy.

This is believed to be going ahead from the beginning of January 2022.

New plan for the Thai economy could see an elite foreign visa scheme generate up to 6% of GDP

In September, the government launched a programme to offer long term visas to eligible foreigners who can both contribute to and invest in the country in a move to boost inward investment and tax revenue within the kingdom’s economy suffering not only from the pandemic crisis but a range of other factors that have blighted Thailand’s economic performance since 2018.

The target of the scheme is to attract over 1 million new foreign residents to Thailand who may, in turn, support up to 6% of the Thai economy.

New draft Ministry of Interior regulations approved by the cabinet in October to allow foreigners to live, work and invest in Thailand

An initial proposal in this regard was agreed upon by the cabinet in October based on two draft regulations presented by the Interior Ministry in consultation with the Immigration Bureau.

One proposal allowed for the upgrade of the Thai Privilege Card for Elite Visa holders which costs from ฿600,000 to ฿2 million.

This allows wealthy foreigners to stay in Thailand for 5 to 20 years while offering a range of privileges and concessionary services under its card scheme operated in conjunction with the Tourism Authority of Thailand.

It is understood that the new regulations may also allow Elite visa holders to stay in Thailand for work purposes as well as tourism.

The new regulations will allow foreign nationals who invest ฿30 million in Thailand to live and work in the country for an extended period under the terms of the Flexible Plus Programme.

The government is also looking at extending the rights of foreigners living in Thailand to own specific property types which are conducive to the programme aiming to attract foreign investors and entrepreneurs of high worth to base themselves permanently here.

Economy projected to grow by 4% in 2022

Speaking to a seminar organised by a Thai news agency on Tuesday, Mr Arkhom suggested that exports from the kingdom could increase by up to 17% in 2022 well ahead of a 5% growth being projected by economists.

Exports are projected to grow by 12% by 2021.

Overall, the Finance Ministry is confident that a growth rate of 4% can be attained for 2022 with rising consumer confidence and a return of the country’s valuable foreign tourism industry bolstered by exports.

He quoted a figure of ฿1 trillion in targeted supports to the financial system by the government to the economy next year with ฿600 billion being pumped in extras state investment and a further ฿300 billion coming through the activities of state enterprises.

Government support plans for the economy in 2022 but no mention of significantly higher borrowing

He also told his audience that there was still ฿250 billion to be spent from the second special loan decree passed this year.

The minister’s package of funding appears to be more conservative than measures outlined in October when the Governor of the Bank of Thailand, Sethaput Suthiwartnarueput, endorsed a tentative proposal by the government to borrow more.

This followed the decision to extend the public debt ceiling from 60% to 70% of GDP under the State Fiscal and Financial Disciplines Act 2018 in September.

More borrowing is a strategy agreed by most economic experts including the World Bank and IMF

Significantly, the Minister of Finance did not mention plans, announced in recent months, for this further borrowing of the third tranche of special financing estimated to be ฿1 trillion.

Reports of a severe financial liquidity crunch in the small and medium-sized business sector emerge

Earlier in November, the Finance Minister said that ฿300 billion of the second tranche was still available and that the government, overall, would inject ฿3.7 trillion into the economy in 2022 including normal expenditure.

Shaky economic recovery as planners target only a 1% gain in 2021 with rising headwinds in Quarter 4

Despite the minister’s optimism, however, there are reports that the Thai economy is currently labouring under a shortage of liquidity in the commercial marketplace.

There are also concerns being expressed by many small and medium-sized businesses of a lack of access to government funding support and measures.

Businesses also experiencing problems sourcing and purchasing raw materials with inflationary pressures

Industry leaders are also pointing to problems in sourcing and purchasing raw materials that have developed as well as complying with strict laws to prevent the further spread of COVID-19 which, in September, caused a setback to the country’s vital manufacturing and export sector which had been earlier tipped to grow at 17% for 2021.

Firms involved in a University of the Thai Chamber of Commerce (UTCC) survey last week reported rising material costs as the inflation factor begins to kick in.

Firms are also reporting an inability to raise prices with stiffer competition in the marketplace.

This has led to calls for the government to reduce import taxes on materials needed for manufacturing and for capital imports to improve efficiency.

‘Business Status’ survey was conducted in mid-November with 625 firms participating in the nationwide project across Thailand

The ‘Business Status’ survey findings were presented by Ms Saowanee Thairungroj, an advisor to the University of the Thai Chamber of Commerce (UTCC).

The survey was conducted by the UTCC among small and medium-sized business concerns from the 12th to the 17th of November.

It indicates that the economic scenario on the ground may be a lot more difficult than government planners appreciate.

It received detailed input from 625 firms involved in industry, trade and services across Thailand. 

This included many of the businesses badly impacted by the COVID-19 crisis including restaurants, wholesalers and tourism service providers.

These accounted for between 50 and 70% of participants while the balance were industrial concerns which have been hit comparatively less by the pandemic despite the challenges faced in September and ongoing measures now being deployed to defeat the disease.

Smaller profits, fewer customers, less employment and over 40% saying they were facing closure

The survey reveals the damage inflicted by this pandemic on a large proportion of Thailand’s business sector with 40.1% of respondents stating that their business enterprise will have to close soon.

Firms reported an average 18.6% decrease in sales with a 14.9% increase in costs. Profits declined by 20.6% on average with incoming orders down by 15.3% amid decreasing liquidity.

Employment has been cut back by 9.8% even after the reopening of the kingdom to tourism and the lifting of lockdown measures and efforts to revive their business concerns.

The main problem reported by businesses was a lack of liquidity at this time with nearly all firms being unable to borrow money to relaunch or recapitalise their operations despite claims by state officials that soft loans are being made available.

Most firms have simply given up on such possibilities.

Airlines give up on government soft loan hope after securing commercial ฿4 billion loan from Exim Bank

In July last year, 7 airlines in Thailand including Thai Air Asia requested ฿5 billion in a government soft loan package. Two months earlier they had requested ฿24 billion but reduced this after discussions with officials and bankers.

Last week, the President of Bangkok Airways, Puttipong Prasarttong-Osoth, told the media that, despite a ฿4 billion facility from Exim Bank (Export-Import Bank of Thailand), they had withdrawn their request after being told that such a facility would mean the government may be obliged to provide similar arrangements to all businesses concerned who have been impacted by the pandemic.

‘From the government’s explanation, they cannot allocate soft loans to us because it might discriminate against other industries that also suffer from the pandemic. The 4 billion-baht loans that Exim Bank has provided to us are ordinary loans with normal interest rates which still require collateral assets, which are not the conditions we requested,’ Mr Puttipong said.

He made it clear that the only option for the firms concerned was to get back to business and trade their way out of the situation.

Business survey advisors say liquidity shortage is a ‘big problem’ and highlight the nightlife sector

‘Liquidity is a big and serious problem. The situation is still very fragile. If there is a new wave of outbreaks that need to lock down again, this will increase the risk of closing the business. More than half of SMEs need additional loans, further liquidity with an average credit line required of ฿654,924 with business expected to return to normal by the fourth quarter of 2022,’ Ms Saowanee said this week.

She especially urged the government to look again also at the need to refloat the country’s nightlife sector which was a key part of Thailand’s economy and particularly important to the foreign tourism industry which both, directly and indirectly, contributes to 20% of the kingdom’s normal GDP levels.

On Wednesday, Mr Sathit, the straight-talking deputy health minister, made clear that, right now, the prospects of even a January 22nd 2022 reopening of this sector were entirely dependent on the Omicron threat.

University official warns of the economic impact of losing just 5% of small and medium-sized enterprises, millions of jobs at stake

The President of the Center for Economic and Business Forecasting at the University of the Thai Chamber of Commerce, Mr Thanawat Phonwichai, estimates that it would cost between ฿200 billion and ฿300 billion for the government to support viable small businesses with liquidity issues, at this time.

He thinks it would be a smart move.

He points out that it would only take 5% of SME type concerns to close to lose the ฿300 billion from the economy together with the loss of between 1 to 2 million jobs.

Both Mr Thanawat and Ms Saowanee agreed that a further outbreak and lockdown would be devastating right now for all businesses and made it clear that they understood the government’s overriding priority was preventing such an occurrence by encouraging further vaccine take-up and continued vigilance as well as the exercise of personal responsibility.

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Further reading:

Shaky economic recovery as planners target only a 1% gain in 2021 with rising headwinds in Quarter 4

Economy climbing out ‘of a hole’, foreign firm’s confidence levels rose sharply during October

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Richest man in Thailand says COVID-19 is like a World War, the kingdom could end up a big loser in the end

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Industry leaders and central bank all warn that foreign tourism must return to avoid a collapse

Refloat of foreign tourism in the 2nd half of 2021 with vaccines pushed by minister and industry for the sector

Fact – only 6,556 visitors arrived in Thailand last month compared to 3.95 million in December 2019

Desperate foreign tourism business concerns are clinging to straws as they try to survive the crisis

Strict entry criteria to remain as officials await clarity on the medical status of vaccinated people

Challenge of the virus and closure to tourism leads to major long term changes in the Thai economy

Finance Minister says economy must pivot away from tourism with a switch to S-Curve industries

Steady as she goes economy driven by exports and public investment with a 3.3% growth rate forecast for 2021

Thailand’s tourism boss targets thousands instead of millions as public health is prioritised above all

Thailand unlikely to reopen doors to mass-market tourism before the end of 2021 until after a full vaccination

Strengthening baht predicted as investors bet on a reopening of Thailand to mass tourism in 2021

Economic picture continues to darken as cabinet approves new ฿700 billion loan to plug the gap of higher deficits

Thailand facing a credit crunch as 3rd virus wave craters the kingdom’s economic recovery plans

3rd virus wave now spells not just economic loss but financial danger as kingdom’s debt level rises

Still time to avoid lockdown says Health Minister as 3rd virus wave dwarfs all infections to date

Thai economy is still in reverse despite rising confidence and a virus threatening a 3rd wave

Reopening of Phuket still not officially approved although it is the ideal test for a broader move

Minister urged not to be afraid to borrow in 2021 as fears grow for a quick foreign tourism revival

Economy to rebound as the year progresses driven by exports and a return of mass foreign tourism

Door closing on quick foreign tourism return as economic recovery is delayed to the end of 2022

Phuket’s plan to self vaccinate on hold as Interior Ministry orders private sector out of vaccine deals

Refloat of foreign tourism in the 2nd half of 2021 with vaccines pushed by minister and industry for the sector

Fact – only 6,556 visitors arrived in Thailand last month compared to 3.95 million in December 2019

Desperate foreign tourism business concerns are clinging to straws as they try to survive the crisis

Finance Minister says economy must pivot away from tourism with a switch to S-Curve industries