By this time, most would try to forget 2014, expecting results will be poor for the economy and their business. The first half of the year was nothing short of a recession and there was no growth engine left in the economy.
Moving into the second half of the year, all signs were pointing in a better direction. The political crisis had dissipated, while the NCPO worked at a speed no elected government had been able to achieve before. From consumers to SMEs to big industries, confidence indicators had rebounded across the board. Unfortunately, confidence was there, but the economic recovery wasn’t. What went wrong? Well, everything.
As any doctor will tell you, when the diagnosis is wrong, treatment will also be misguided. Though political conflict was a major event, other things were also happening to the economy. But when our attention was intensely focused on the political conflict, we got blindsided by other factors such as the long collapse in agricultural prices, high household debt, supply-side problems in exports and delayed private investment. Apparently, dealing away with the political conflict only went so far. It wasn’t enough to jumpstart the economy.
With the year almost over, is there any hope left for the Thai economy? In fact, there is. Bear in mind though, there is no way to turn around this year’s GDP figure anymore. It is what it is.
However, the glimpse of hope may be just enough to kick start the economy in the final two months of the year, if appropriate attention is paid to and actions are taken, and to set the right economic momentum for 2015.
Focus first on expanding seasonal orders. While conventional wisdom points to the low season in export orders, some selected and high potential markets are entering the high season and capturing more orders from these markets will help boost production and sales. The clear alternative markets are Cambodia, Laos, Myanmar and Vietnam (CLMV) and they are entering high seasonal order periods. Thailand shares many seasonal effects with these economies and delivery times are short enough to meet shipment schedules.
While total exports performed poorly this year, contracting 1.4 per cent, international shipments to CLMV grew 8.7 per cent. Those with access to border trade fared even better due to growth in border exports to Myanmar of 14 per cent, Laos of 4.5 per cent and Cambodia of 6.8 per cent, whose baht revenues would register double-digit growth in all three markets. So look towards these economies to release excess inventory on hand, but there is probably not enough time to manufacture for new orders.
Another market active during this time of the year is China. Since Chinese celebrate the New Year at a different time on the calendar than the Western world, there is still room to pick up orders to meet seasonal demand. The Chinese New Year next year falls on February 19, far into 2015, giving producers more time and space to seek and fill these orders. Regardless of the slowdown in overall demand for manufactured products from China, we expect stronger growth in consumer goods, foods, fruits and vegetables going into the Chinese New Year.
Moving away from exports, a clear candidate for high season at this time of the year is tourism. With stronger recovery signs in tourist arrivals, businesses can tap into foreign demand by focusing on the right and realistic markets. Despite the desirability of attracting high-spending visitors from Europe, trips to Thailand by Europeans take roughly six months to a year to plan ahead. In other words, any attempt to attract them now will likely result in increasing European visitors at the end of next year, not this tourist season.
We must take into account this time limitation and focus our efforts on attracting nearby visitors such as Chinese, Asians and Aseans. Their planning for a trip typically takes a shorter time than Europeans and their travel time is much less. The downside is that their visits are also typically shorter with less spending per head. Yet, the upside is that a big chunk of Asean visitors will visit us more than once a year.
Last, although it is necessary to rely on foreign demand to rekindle the Thai economy, we still have some room to revive domestic demand again. Domestic spending in the categories of non-durables and services showed more signs of stability with little to small growth numbers. And such spending does not typically involve major purchases or financing via troubling household debt.
As we head into the long holiday season, and consider the government’s tax rebate programme for travel expenses, we believe the economy may be able to once again lean on domestic demand, something we haven’t seen in the past three quarters. However, coordinated efforts are a must, from integrating domestic tour promotions and ensuring tourist safety to reducing congested travel via all modes and monitoring fair practices in pricing goods and services.
This year began on a low note, but we don’t need to end it on one. Though the high seasonal demands may not be enough to turnaround this year’s performance, it can ensure that we enter 2015 on a high note. Well, that’s a start.
Benjarong Suwankiri is head of TMB Analytics at TMB Bank.
Views expressed in this article are those of the authors and not of TMB Bank or its executives.