Thailand bucks trend as confidence slumps
Global economies are glowing in a “spring surge” of business optimism, with all regions marching in step, despite a slowdown in some emerging economies including Thailand, according to Grant Thornton.
The recovery is moving on to a more sustainable footing and, with economic uncertainty declining, the hope is that businesses will renew investment in the coming months to ensure long-term growth.
Grant Thornton’s survey of more than 3,300 businesses in 45 economies indicates that a net 44 per cent of businesses globally hold an optimistic economic outlook, the highest since 2007 and a 17-percentage-point increase from the previous quarter.
This confidence is manifested across the globe.
In North America (64 per cent), optimism is at its highest since 2004, and in the European Union and Asia-Pacific region (both 37 per cent) since 2007 and 2008. In Latin America, optimism rebounded from a four-year low in the fourth quarter of last year to net 43 per cent.
However, in Thailand optimism has continued its decline, down 10 points, reflecting the prolonged state of political and economic uncertainty and recent downgrades in forecasts for growth in gross domestic product.
Ian Pascoe, managing partner for Thailand, said the data provided strong hope that the global recovery is starting to take hold.
“The rise in optimism closely mirrors recent growth of stock markets around the world – the S&P 500 closed at a new record high earlier this month. We have moved into the first prolonged period of economic stability since the financial crisis and while challenges remain, particularly in the euro zone, Ukraine and some emerging markets, firms can think and plan for the longer term.
“However, this also serves as a stark backdrop for our own situation in Thailand, where we are seeing a year of stagnation. In order simply to maintain jobs and the economy, Thailand needs to see GDP growth of 4 per cent, but it will not reach that level this year, and may even struggle to eke that out in 2015.”
The study also reviewed regional optimism about the Asean Economic Community (AEC), which envisages a single market and production base for the community that is characterised by the free flow of goods, services, investments, capital and skills.
Most support is positive for plans to introduce a single market to the region, especially from Vietnam (74 per cent), Malaysia (44 per cent) and the Philippines (42 per cent).
However, support from Thailand and Indonesia, the region’s two largest economies, is considerably lower at 18 per cent and 9.8 per cent.
“At a time when the AEC is about to begin and opportunity for the region’s second largest economy should abound, Thailand is becoming paralysed by introspection,” Pascoe said.
“Globally the IMF [International Monetary Fund] is predicting robust global growth of 3.6 per cent this year. We believe conditions are perfectly poised for dynamic firms to begin to invest more.
“We expect to see this pick up during the rest of 2014. There has been a marginal improvement in plans to invest in plant and machinery, but R&D [research and development] has remained flat and not increased in line with optimism.
“As IMF managing director Christine Lagarde said recently, ‘greater investment needs to happen if this new-found optimism is to be converted into meaningful growth’.”
The data are drawn from interviews in February with more than 3,300 chief executive officers, managing directors, chairmen or other senior executives from both listed and privately held businesses in all industries.