Since Thailand's economy was devastated by the Asian Financial Crisis, it has bounced back strongly, in line with regional trends. The country’s weak political outlook remains Thailand’s Achilles heel, given the entrenched political divide between the rural and middle and upper income class. While Thailand's economy will continue to be undermined by political volatility, it will not be completely hindered by it, and will continue to see growth in the manufacturing and tourism sectors over the coming years.

We keep our clients informed of the latest market moves and political developments in Thailand, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 22 of Thailand’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our results-proven research teams. Our aim is to keep you ahead of the curve, so you can feel confident doing business in Thailand.

Country Risk

Thailand Country Risk

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Core Views

  • Thailand is rapidly regressing from democracy. With the military junta continuing to consolidate power, there is a growing risk that Thailand could remain a military-governed country for longer than expected, which would undermine its long-term economic growth prospects. A return to democracy is therefore far from assured.

  • We expect the Thai economy to continue its rebound on the back of the military government's pro-growth policies. That said, export headwinds from cooling regional demand, the risk of renewed political violence, as well as the high level of household debt inform our outlook for the recovery to take place gradually. As such, we forecast Thailand's real GDP growth to come in at 3.5% in 2015, slower than our initial forecast of 4.1%.

  • The ongoing economic rebound in Thailand, as well as efforts by...

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Thailand Operational Risk Coverage (9)

Thailand Operational Risk

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BMI View: Relative to other Southeast Asian countries, Thailand's labour market competitiveness is slipping. Due to a shortage of technical skills and unskilled labour, combined with rising labour costs, the country's is losing appeal as a manufacturing destination. Meanwhile, weakness in the education sector is preventing evolution of a knowledge-based economy, and poor foreign language skills prevent investment in international services. Rising labour costs are the greatest element of labour market risk in the Thai economy, while a shortage of skills in key areas is another area of concern commonly cited by investors. This results from misalignment between industry and the education system, although education policy has improved significantly in the last decade. These elements combine to give Thailand a Labour Market R...

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Thailand Crime & Security

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BMI View: Thailand is a generally safe place for foreign business travellers, expatriate workers and tourists, although ongoing criminal risks persist, particularly in urban areas. The main criminal risk to foreign workers in the country is petty crime such as pick-pocketing, as well as credit card fraud. That said, violent crime and sexual violence are not uncommon, particularly in and around Bangkok. There is also a risk that the current political instability could escalate into an urban guerrilla warfare campaign approaching civil war. Ongoing separatist violence poses a further threat in the south of the country. Thailand receives an overall score...

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Thailand Labour Market

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Compared to other Southeast Asian countries, Thailand's labour market competitiveness is slipping. Due to a shortage of technical skills and unskilled labour, combined with rising labour costs, the country's is losing appeal as a manufacturing destination. Meanwhile, weakness in the education sector is preventing evolution of a knowledge-based economy, and poor foreign language skills prevent investment in international services.

Rising labour costs are the greatest element of labour market risk in the Thai economy, while a shortage of skills in key areas is another area of concern commonly cited by investors. This results from misalignment between industry and the education system, although education policy has improved significantly in the last decade. These elements combine to give Thailand a Labour Market risk score of 55.9 out of 100, ranking 54 th out of...

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Thailand Logistics

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BMI View: Thailand has established a strong logistics sector, supported by modern infrastructure and services - with the exception of the rail network. That said, the long-term competitiveness of Thailand's logistics sector is threatened by regular political upheavals. The Thai government has repeatedly failed to implement large-scale transport development plans, particularly in the rail sector, which has been neglected for decades. As a result, investors will start looking increasingly to Malaysia and Vietnam as manufacturing hub alternatives, offering stronger supply chain options. As an industrialised country with a large production base, Thailand has become a hub for international trade. Growth in trade and consumption has been matched by development in transport and utilities infrastructure. Subsequently, Thailand scores 75.4 out of 100 for...

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Thailand Trade & Investment

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Foreign direct investment (FDI) is falling in Thailand as investors back off amid political upheaval. Despite the slowdown, international trade continues, albeit at lower rates of growth. Strong fundamentals in the financial sector have maintained confidence in the national economy and have offered economic resilience in the face of political stress. Thailand scores 55.6 out of 100 in the BMI Trade and Investment Risk Index and is ranked 66th out of 170 countries globally. There are higher levels of risk in terms of the country's legal environment and moderate risk in terms of government intervention. Thailand performs most strongly for economic openness.

Thailand's lowest score in the Trade and Investment Risk Index is on the Legal component. Laws are geared in favour of domestic firms and state-owned companies, while the government retains power to implement controls and distort the market, which warps the playing...

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Thailand Industry Coverage (23)

Agribusiness

Thailand Agribusiness

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BMI View: Thailand will maintain its status as a key Asian agricultural provider in the coming years, as the sector boasts strong export opportunities and government support as well as an efficient food producing industry. The sugar and livestock sectors hold promising growth stories. However, the government's interference in the market, especially in the rice sector, will hinder the competitiveness of Thai production compared to its Asian rivals. Rice production will face downward pressure as the government incentivises farmers to switch away from rice towards other crops, mainly sugarcane, in a bid to curb oversupply of rice. That said, Thailand will likely regain its status as the world's largest rice exporter as the government seeks to clear out its rice stockpile by 2016.

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Autos

Thailand Autos

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We downgrade our 2015 auto sales forecast for Thailand, and expect domestic vehicle sales to grow marginally by 1.4% to 894,144 units, down from 4.3% previously. The forecast downgrade is largely owing to weaker economic outlook due to external headwinds, which we believe will have a knock on impact on consumer sentiment. Nonetheless, our forecast still reflects a slow recovery since the sharp 33.7% decline in vehicle sales registered in 2014, as we see positive impacts of a more stable political and business environment.

Over the coming months, we expect a weaker economic growth outlook to weigh on consumer sentiment, putting a cap on auto demand. Thailand's fairly large exposure to China, with the latter accounting for 11% of Thai outbound shipments in 2014 means that the gradual slowdown of its trading partner will hamper Thailand's incipient economic growth recovery.

That said, our forecast for...

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Commercial Banking

Thailand Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Thailand Consumer Electronics

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BMI View: We expect the consumer electronics market will return to growth in 2015, but baht depreciation against the US dollar will continue to be a drag on growth through deferred purchases and substitution for lower cost models as Thai household purchasing power is eroded in global markets. Nonetheless 2015 will see stronger performance than 2014 when growth across segments was uneven in a climate of political uncertainty and baht depreciation. The computer hardware and AV segments contracted, but handset sales continued to grow. We expect a revival the growth trend from 2016 as the economic and political environment becomes more supportive, supporting a CAGR of 2.8% in US dollar terms 2015-2019 to a total value of almost USD8.2bn. There will also be trends across market segments, for instance, we expect demand will be boosted by price competition between vendors, with a number of global vendors...

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Defence & Security

Thailand Defence & Security

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BMI View: A military coup in 2014 has successfully imposed a short-term solution to restore order and stability under General Prayuth Chan-ocha. This interim government is set to remain in place until October 2015 at the earliest, but the army will continue to play a major role in domestic politics beyond the transition to civilian rule. Inefficient allocation of resources hampers development, but will not be addressed by any government in the near future.

The ouster of Prime Minister Yingluck Shinawatra on constitutional grounds in May 2014 triggered a rapid escalation in civil tensions across Thailand, pitting her 'red shirt' supporters against the largely urban, pro-establishment, 'yellow shirts'. With the caretaker government unable to calm tensions, the military stepped in and dismissed the interim administration. Temporarily imposing martial law and a curfew, as well as suspending much of...

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Food & Drink

Thailand Food & Drink

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BMI View: Impeachment proceedings against former premier Yingluck Shinawatra will spark renewed political violence in Thailand, which would weigh on the nascent economic growth recovery. We may look to substantially lower our 2015 real GDP growth forecast of 4.1 % should further negative political developments be forthcoming. The Thai economy has weathered a series of economic storms in recent years (from the global financial crisis to the Japanese tsunami and devastating floods) and we do not expect the political crisis to plunge the economy into recession. However, when we combine the uncertainty posed by the political stalemate with the downbeat outlook for Thai households amid elevated debt burdens, as well as external headwinds stemming from moderating growth in China and general weakness in the Japanese economy, real GDP growth seems likely to...

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Freight Transport

Thailand Freight Transport

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BMI View: We expect a mixed growth picture across Thailand's freight transport sector in 2015. While challenges from the volatile political situation - following the establishment of a military government in May 2014 - persist, the government has introduced a range of measures which should help boost the economy and reassure investors. However, a shaky outlook for domestic consumer demand will weigh on the road haulage and air freight sectors. We expect rail freight, which is less exposed to the consumer, to be the outperforming freight mode, thanks to a bumper rice harvest and ongoing investment into its development and cross-border connectivity.

The outlook for Thailand's trade is fairly lacklustre in 2015. In real terms we forecast that growth will be positive, albeit very slow at just 0.1%. This is due to a projected 0.3% real contraction in imports,...

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Information Technology

Thailand Information Technology

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BMI View: After a challenging 2014 during which market growth was negatively impacted by political and economic uncertainty, we expect IT market spending growth will accelerate to 4.1% in 2015 as consumer and enterprise confidence recovers. It should however be noted that baht depreciation will continue to weigh on US dollar growth, though not to such as extent as to materially impact our overall assessment of market trends. Looking ahead over the medium term, we forecast an IT market spending CAGR of 6.2% 2015-2019, with total value forecast to reach THB218.8bn in 2019. All three IT market segments are forecast to grow over the medium term, but it is IT services sales that are expected to outperform as adoption of cloud computing services,...

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Infrastructure

Thailand Infrastructure

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BMI View: Thailand's construction sector will see a strong recovery in 2015, with the government's infrastructure plans being supported by near-term political stability and a favourable funding outlook. Beyond 2015, politics remains a key risk, while labour constraints will also limit long-term growth for the sector.

Key Trends And Developments

  • We forecast Thailand's construction sector to register strong growth of 14.8% in 2015, while a more uncertain political outlook will weigh on growth beyond 2015.

  • Our strong growth forecast for 2015 is underpinned by low base effects from 2014, and near term political stability which will facilitate the government's infrastructure projects.

  • An improving funding outlook, with possibility of further...

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Insurance

Thailand Insurance

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BMI View: Most trends in Thailand's insurance sector are positive and will remain in place throughout the forecast period. Life insurance is clearly very well established as a conduit for organised savings of the country's wealthier households. Well capitalised and innovative life insurers should be able to achieve strong growth in premiums through the forecast period, if not necessarily in 2015. In the non-life segment, most sub-sectors will grow as a result of the (likely) steady expansion of the economy, the development of new products and insurers' reaching out to new users. The main problem is overcapacity in the motor vehicle sub-sector, which accounts for about half of all activity in the non-life segment: prices and margins are under downwards pressure, and in a sub-sector where volume growth will probably be minimal.

Thailand's insurance sector has many...

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Medical Devices

Thailand Medical Devices

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BMI Industry View: The Thai market's continued reliance on imported medical devices means demand has remained strong, resulting in an attractive 13.7% CAGR growth rate for the forecast period. Local manufacturers, as well as multinationals, in the country remain focused on producing basic supplies mainly geared for export and this trend is not expected to change in the near future. Imports currently account for over 85% of the market. The current political situation, if prolonged or takes a turn for the worse, could very well impact this projected growth.

Headline Industry...

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Mining

Thailand Mining

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BMI View: The cooling of the Chinese economy will remove the shine off mining investment in South East Asia. Frontier regions will be the first places where miners pull back their investment as brownfield projects take precedence. Nonetheless, it is certainly not all gloomy in the mining sector. Resilient demand from the power sector will continue to support growth in coal production, while Indonesia's export ban on unprocessed ores will help support bauxite prices.

Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to uncover its potential over the coming years. The cooling of Chinese economic growth will remove a crucial pillar of support for mineral prices, particularly industrial metals such as iron ore and copper. For...

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Oil & Gas

Thailand Oil & Gas

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BMI View: We expect Thailand's oil and gas consumption growth to significantly outstrip production increases over the next decade, which will increase reliance on imports. Natural gas demand will be largely satisfied by LNG imports over the coming years.

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Headline Forecasts (Thailand 2013-2019)
2013 2014e 2015f 2016f 2017f

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Petrochemicals

Thailand Petrochemicals

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Although Thailand is making a solid turnaround from a politically turbulent 2014, BMI's latest Thailand Petrochemicals Report warns that some export segments - such as the automotive industry - face slower demand that will directly impact the petrochemicals sector. On the upside, the domestic construction industry is rebounding in line with an overall upturn in the economy, which should help to offset some of the effects of slower export growth.

In 2014, the construction and automotive industries witnessed a sharp decline in activity, but growth is expected in 2015 with construction rising by 2.4% and automotive production growing 4.2%, which should stimulate domestic petrochemicals consumption. However, softer demand for vehicles in South East Asia will be a drag on overall petrochemicals output growth as the Thai automotive industry is a major consumer of moulded plastic and rubber products.

...

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Pharmaceuticals & Healthcare

Thailand Pharmaceuticals & Healthcare

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BMI View: Thailand's medical system will see a transformation. This comes as there is a growing divergence between the three healthcare schemes in the country in terms of cost as well as healthcare outcomes. In addition, the economy has taken a much stronger precedence under the new military government which will curtail additional funding towards Thailand's healthcare programmes despite the schemes' growing financial constraints. This change could have negative ramifications for drugmakers and healthcare providers - especially should the shift be towards a central agency that negotiates prices for all three programmes.

Headline Expenditure Projections

  • Pharmaceuticals: THB145.5bn (USD4.5bn) in 2014 to THB152.9bn (USD4.6bn) in 2015; +5.1% in local currency terms and +2.7% in US dollar terms...

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Power

Thailand Power

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BMI View: Thailand's plan to reduce its reliance on gas-fired power generation will create opportunities for alternatives such as coal and renewables, which poses upside risks to our outlook for the country's energy related infrastructure. We highlight that lower than expected power consumption over the near term means such opportunities will begin to have an impact on infrastructure construction only beyond 2017-2018 as projects are delayed until demand picks up. We retain a modest growth forecast for 2015 and 2016, with power generation set to grow by 3.5% and 3.4%, respectively.

The largest source of growth in 2015 will be thermal generation, while non-hydropower renewables will be the fastest growing sub-sector at 11.8%. Meanwhile, the Thai power sector's long-term growth outlook is muted, as the country continues to...

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Real Estate

Thailand Real Estate

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BMI View: We see good long term potential in Thailand's commercial real estate sector as continued growth in Thailand's tourism sector combined with economic recovery of its domestic market. However, the slowdown of Thailand's trading partners has had a negative effect on domestic consumer confidence and consumer spending. The relatively competitive property prices and sufficient yields make Thailand continue to be an attractive market for investors.

Thailand's real GDP growth exhibited a recovery in 2015 after the previous 2 years, although the recovery has been slower than expected and the Thai Central Bank recently revised down 2015 real GDP growth to 3.8% from 4.0%. The slowed progress in recovery is largely attributed to slower growth in China and other countries in Asia, combined with a slow government budget disbursement due to bureaucracy. The recovery,...

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Renewables

Thailand Renewables

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BMI View : Despite the political turmoil leading to a military coup in May 2014 there are signs that our previous forecast still holds in place as the ruling regime sees solar energy projects as key to attracting foreign investors scared off by recent events. We have further revised upwards solar energy production in our 10-year forecast. In 2015 non-hydropower renewable generation will expand by around 11.8%, with growth primarily in solar and wind generation. Growth in solar will be driven by commercial- and residential-scale projects, with companies such as Thailand's SPCG maintaining a large pipeline of commercial solar projects. Even though SPCG has already completed 36 solar power projects with a combined capacity of around 260MW over the past four years, the pipeline remains large. We note that...

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Retail

Thailand Retail

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BMI View: Thailand's retail sector has benefited from impressive growth over recent years and will continue to be boosted by growth in tourist arrivals and consumer spending. With the ever-increasing number of foreign brands with shops in the capital, Bangkok is increasingly becoming a shopping destination for tourists in the region, in addition to its traditional role in the beach holiday market.

We believe ongoing efforts by the military government to boost the Thai economy should continue to gain traction over the coming quarters, and we maintain our forecast for Thailand's real GDP growth to come in at 4.1% in 2015, up from 0.7% in 2014. That said, we note that there are numerous headwinds that will impede the pace of recovery, posing...

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Shipping

Thailand Shipping

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BMI View: We expect healthy growth across Thailand's maritime shipping sector in 2015. While challenges from the volatile political situation - following the establishment of a military government in May 2014 - persist, the government has introduced a range of measures which should help boost the economy and reassure investors. Externally, the market for Thai exports is looking stronger, and continued investment into the maritime facilities will see growth continue over the longer term.

Headline Industry Data

  • Gross tonnage at Laem Chabang, the country's largest port, is set to rise by 6.1% to 76.61mn tonnes in 2015, and will average growth of 6.5% a year over our medium-term forecast period to 2019.

  • Box handling at the same port will rise 7.5% to 7.08mn twenty-foot equivalent units (TEUs...

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Telecommunications

Thailand Telecommunications

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BMI View: The Thai telecoms industry has faced a multitude of challenges in the past year with the government and the Prime Minister approving a variety of controversial new laws and policies that threaten to send the market into an industry model akin to the concession-based revenue sharing regime as private companies partner with inefficient state owned enterprises. AIS intense to develop a nationwide broadband network to rival TrueOnline and TOT , whilst True has committed to further 3G and 4G expansion. The spectrum auction intended to take place in November 2015 is marred by legislative troubles and the mandatory sim registration will have a negative impact to our forecast in the months to come.

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Tourism

Thailand Tourism

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BMI View : The Thailand tourism report examines a range of key indicators in this popular and well-established holiday destination, including the expected growth in both inbound and outbound travel and the impact of this growth upon tourism-related expenditure and industry value. While the tourism market dipped in 2014 following the military coup, we expect a rapid recovery and are forecasting healthy growth across all indicators by the end of the forecast period in 2019.

In the year since the military coup of May 2014, Thailand has largely experienced widespread stability which has been reassuring to investors and tourists alike. A general election is expected to take place in 2016, and we may see some political unrest in the run-up, though this will...

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Water

Thailand Water

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BMI View: With the continued stalling of the project pipeline and the persistent risk of both drought and flood damage, in conjunction with high losses and limited sanitation facilities, we view the Thai water sector as offering minimal opportunities and high risks to both services and infrastructure companies. The recent announcement that some urgently needed works are to be restarted is a positive step; however, we still anticipate delays and cancellations.

The beginning of the dry season in Thailand may result in severe water shortages in 31 provinces in 2015. Parts of eight provinces have already been declared drought disaster areas, according to Department of Groundwater Resources Director General Praneet Roibang. The Ministry of Agriculture and Cooperatives (MOAC) has taken several steps to mitigate the situation, such as requesting farmers to decrease second-crop rice planting in certain areas, employing 32,...

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