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» The Business Confidence Index increased 2 points In the Second Quarter of 2022

01st August 2022, Siam Ratings Agency Company Limited (SRA) announced the result of the survey about WVB Business Confidence Index in the Second quarter of 2022.

SRA Co., Ltd. conducts the survey quarterly. The main objects of the survey are companies which have the most well-known brand, the largest number of Total Assets, Total Revenues, and Employees. Being performed from the early of July 2022 to the late of July 2022, the survey attracted 150 Companies which active in many different fields in Thailand, such as Agriculture, Automotive, Construction, Technology, Energy, Electronics, Telecommunications, Services… In particular, large and medium enterprises accounted for over 97% of total enterprises participating in this quarter.

According to the survey, the Business Confidence Index (BCI) in the Second quarter of 2022 reached 130 points, increased by 2 points compared to the First quarter of 2022 (128 points), This index shows that companies in Thailand have a positive perspective on the current economic situation, which most companies also say they are still confident that the Thai economy will improve in the next phase. Besides, there are also many enterprises that believe the current economy has many fluctuations and it is difficult to predict due to the volatility of the global economy and especially the Covid-19 situation variable in 2022.

Summary of investigation results of 6 components building Business Confidence Index (BCI) in the Second quarter of 2022 as follows:

- On the general economic situation of Thailand today:

Only 25.33% of enterprises participating in the survey said that Thailand's overall economy is now better than 12 months ago, 52.67% of enterprises said that the economic conditions of Thailand remained the same. 22.00% of enterprises said that economic conditions were somewhat worse than 12 months ago.

According to the Shareholder Newsletter from Kasikorn Research Center (KResearch), The Russia-Ukraine war triggered additional risks to the global economy during 1Q2022

During 1Q2022, the global economy was still reeling from the COVID-19 pandemic and additional risks stemming from the Russia-Ukraine conflict that emerged in February 2022. As Russia is one of the world’s important energy sources, the conflict has catapulted crude oil prices to more than USD 100 per barrel for the first time in eight years during March 2022. The world, therefore, had to bear the blunt of soaring prices of a wide range of products as reflected in inflation rates that exceeded the 2-percent target of most leading central banks. For instance, the US inflation rate hit a 40-year high of 8.5 percent YoY in March 2022. The inflation rate in Europe also climbed to a record high of 7.5 percent YoY while accelerating inflation rates were also seen in Asian countries although their economic conditions differ from those in the West as the economic activity of most Asian nations such as Thailand have yet to fully recover. This factor is set to further pressure domestic consumption that is already fragile, going forward.

Regarding the Thai economy, domestic consumption rebounded over that seen in the previous year (up 2.5 percent YoY), but the overall economy was still pressured by the outbreak of the Omicron coronavirus variant that emerged in late 2021 and elevated product costs. The 1Q2022 inflation rate grew 4.75 percent YoY, driven by surging energy and raw food costs. Nevertheless, a key driver to the Thai economy remained the export sector that grew at a staggering 14.9 percent YoY in line with the economies of Thailand’s major trade partners. Additionally, tourism began to show improving signs, thanks to the reopening of the Test & Go entry system (February 1, 2022). Although the number of Russian tourist arrivals in Thailand declined amid the Russia-Ukraine conflict, the overall number of international tourist arrivals increased to 497,690 in 1Q2022, from the 20,170 recorded for 1Q2021.

- Prediction of Thailand general economic situation in the next 12 months:

 74.00% of enterprises believed that Thailand’s economy would be better in the next 12 months, 26.00% said that the economy would remain unchanged, and 0.00% of businesses are worried about Thailand’s economy in the future.

According to the Shareholder Newsletter from Kasikorn Research Center (KResearch), Soaring product prices will continue to pressure the Thai economic recovery while a COVID-19 transition plan in which the pandemic will be declared endemic, and the reopening of Thailand will support economic conditions during 2Q2022.

Currently, there is no end in sight in the Russia-Ukraine conflict while there are additional and persistent sanctions against Russia (the EU recently announced its plan to scrap oil imports from Russia). Such factors will continue to cause prices of various commodities such as energy to stay at elevated levels. Moreover, the Thai government began to scrap the freezing of prices of various necessities such as cooking gas (April 2022) and oil (May 2022) by allowing the prices to increase gradually. Because such products are prime costs for the manufacturing and distribution of most other products, a cost transfer to consumers will increasingly be seen from now on. Meanwhile, the fourth phase of the co-payment program expired in April 2022, and there have been no new relief measures introduced so far. Only 10 relief measures focusing on helping low-income earners are still in place. Therefore, the recovery in domestic consumption will continue to be pressured by high product prices that are expected to persist until at least 1H2022. However, Thailand began to make a transition towards an endemic phase in March. As a result, related medical and quarantine requirements have been eased. It is expected that Thailand will declare the pandemic as endemic in July 2022. Additionally, economic activity will increasingly return to normalcy during the transition period amid pent-up demand after Thailand has endured the COVID-19 pandemic for more than two years. Such factors are bound to support domestic consumption in 2Q2022.

KResearch, project that the Thai economy in 2Q2022 will slow down from that reported during 1Q2022 to -0.3 percent QoQ, which would be lower than our prior estimate of 1.7 percent QoQ made in 1Q2022. Key risks that must be closely monitored are still elevated product prices as they will likely hurt domestic purchasing power and consumption. Nevertheless, domestic consumption will be supported by pent-up demand after Thailand transitions towards an endemic phase. Positive signs are also seen in the export sector and tourism, thanks to the new entry requirements.

- Plans to use employees:

In the survey: 37.33% of enterprises expected to raise human resources; 60.67% of enterprises planned to remain and 2.00% of enterprises will reduce the number of employees in the future.

According to The National Economic and Social Development Council of Thailand (NESDC), Employment increased both agricultural and non-agricultural sectors. The unemployment rate decreased from the previous quarter and the same quarter of the previous year.

The employment increased by 3.0 percent, improved from a 1.0-percent decline in the previous quarter. Non-agricultural employment (shared 70.54 percent) rebounded by 3.1 percent, mainly due to the increase of employment in the wholesale and retail trade; repair of motor vehicles and motorcycles. Nevertheless, the employment in construction and accommodation and food service activities sectors continued to decline for the third consecutive quarter by 1.1 percent. Agriculture employment (shared 29.46 percent) continued to increase for the sixth consecutive quarter by 3.0 percent caused by the increase in the production of some key agricultural products such as paddy, sugar cane and fruit trees, etc. The unemployment rate in this quarter stood at 1.53 percent, lower than 1.64 percent in the last quarter and 1.96 percent in the same quarter of the previous year. The average number of unemployed recorded at 6.07 hundred thousand people, lower than 6.32 hundred thousand people in the previous quarter and 7.58 hundred thousand people in the same period last year.

- Investment plans for fixed assets:

72.00% of surveyed businesses planned to invest more costs for fixed assets, 27.33% of these still have no plan and 0.67% planned to reduce the cost for fixed assets in the next 12 months.

- The belief in revenue growth:

81.33% of participating enterprises were confident of an increase in sales, 18.67% of enterprises said that the revenue would remain and 0.00% business is concerned about the number of sales going down in the next 12 months.

- The belief in profit growth:

81.33% of enterprises believed that profit would rise in the following year, 18.67% of enterprises believed that profit would remain and 0.00% business is concerned about the number of Profit going down in the next 12 months.

According to The National Economic and Social Development Council of Thailand (NESDC), Thai Economic Outlook for 2022.

The Thai economy in 2022 tends to continually improve, supported by the recoveries of domestic demand and the tourism sector, following the continued easing COVID-19 related restriction measures. Consequently, households, businesses, and tourism sector are able to gradually normalize their economic activities to the pre-pandemic levels. In addition, other key supporting factors include export resumption following expansions of the world economy and trade volume. However, constraints and risks which could undermine the 2022 baseline growth are particularly the uncertainties regarding the world economic and trade prospects, vulnerability of the households’ and businesses’ financial conditions especially amid the inflationary pressures, and COVID-19 mutations that could lead to further outbreak.

The recovery of domestic demand will be supported by the continual relaxation of containment measures after the subsided Omicron variant outbreak situation, along with the progress of domestic vaccine distribution. Consequently, economic activities and domestic consumption tend to recover continually. Furthermore, the domestic demand will also be driven by an increase in households and businesses income bases due to expansions of exports and manufacturing sector, together with an improvement of the labor market as reflected by a gradual decline in unemployment rate from 1.6 percent in the previous quarter to 1.5 percent, the lowest rate in 8 quarters. Meanwhile, private investment is anticipated to grow due to the expansion of exports and the manufacturing sector, along with an improvement of capacity utilization.

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