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.
Thailand Country Risk
The Thai military's extended stay in power until at least 2017 following the rejection of the draft constitution will allow for an acceleration of its efforts to remove former premier Thaksin Shinawatra (2001-2006) and his allies from domestic politics, risking a further deepening of the political divide in the country and a rapid regression towards Myanmar-style authoritarianism.
Government efforts to shore up the Thai economy and weak crude oil prices should help to support the ongoing economic recovery. That said, export headwinds will act as a drag. As such, we forecast Thailand's real GDP growth to come in at 3.3% in 2016, marking only a marginal increase from a forecasted 3.2% in 2015.
While the Thai government will increase spending in 2016 to accelerate the ongoing economic recovery, gradually improving...
Thailand Operational Risk Coverage (9)
Thailand Operational Risk
Thailand Operational Risk
BMI View: 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 66.8 out of 100 in the BMI Trade and Investment Risk Index and is ranked eighth...
Thailand Crime & Security
Thailand Crime & Security
BMI View: Thailand is a relatively safe location for businesses and workers. Although the separatist insurgency in the south and the regular public demonstrations may hamper business activities, there is no security risk significant enough to consistently disrupt operations. However, there are some significant crime risks in the country, particularly stemming from financial, cyber and organised crime. Cyberattacks are one of the most pertinent concerns for businesses, and will require significant expenditure to mitigate. Simultaneously, Thailand's large organised crime network undercuts legitimate enterprises and colludes with authorities to hinder competition. The Royal Thai Police are notoriously corrupt and incompetent, meaning that crimes directed at foreigners and...
Thailand Labour Market
Thailand Labour Market
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...
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 75.3 out of 100 for...
Thailand Trade & Investment
Thailand Trade & Investment
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...
Thailand Industry Coverage (23)
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.
BMI View: Following a contraction in vehicle sales over the 2014-2015 period, an improving economic outlook will lend support to vehicle sales over our forecast period 2016-2019. However, growth will be subdued and average 3.5% over this period constrained by high levels of household debt and the introduction of new vehicle excise tax.
|Economic Recovery To Drive Vehicle Sales|
|Domestic Vehicle Sales|
Thailand Commercial Banking
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Thailand Consumer Electronics
BMI View: Thailand's consumer electronics market has a bright medium-term outlook in comparison to the declines in market value that accompanied political uncertainty and challenging economic conditions during 2013-2015.
Our outlook is for robust growth in household incomes in Thailand in 2016-2019, which will significantly deepen the market for big-ticket items such as PCs, TV sets and higher value smartphones. As a result of this more supportive economic backdrop, as well as baht appreciation against the US dollar from 2017, our core scenario sees the market returning to a dynamic of vendors tapping into opportunities presented by income growth in the context of relatively low device penetration rates. We expect this to support an overall consumer electronics devices spending growth CAGR of 3.6% 2016-2019 to a total of USD7.84bn in 2019. The potential for economic headwinds to disrupt...
Defence & Security
Thailand Defence & Security
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...
Food & Drink
Thailand Food & Drink
BMI View: Thailand's household spending will remain under pressure over the coming quarters, as the consumer recovery takes time to gain traction despite low inflation levels. Over the longer term, household incomes will increase steadily, which will bolster consumption of food and drink, and create premiumisation opportunities. However, increasing government intervention in the mass grocery retail sector - by restricting the opening of large-scale outlets - and in the alcoholic drinks segment - by regulating sales and advertisement - will cap growth in these categories.
Headline Industry Data (local currency)
2015 food consumption growth: +3.2%; compound annual growth rate (CAGR) 2014 to 2019: +4.8%.
2015 alcoholic drinks value sales: +1.9%; CAGR to 2019: +4.5%.
Thailand Freight Transport
BMI View: All three modes of Thailand's freight sector are set to post positive growth in 2016, with growth rates either remaining on a par or growing over our medium-term period to 2019. The country's trade figures will return to positive growth in 2016, in both real and nominal terms, suggesting the Asian economic slowdown will have had a limited effect on the economy. Continuing investment in transport infrastructure, particularly in the rail and air freight modes, will reap rewards in the medium and longer term.
Thailand's macroeconomic outlook looks rosy, if not robust, in 2016. Growth in both real imports and exports at almost equal levels sees a positive return to real growth too. Real GDP growth is also set to grow at a healthy level to 3.3% in 2016, though this will rise steadily to the end of our medium-term forecast period in 2019. GDP per capita in local...
Thailand Information Technology
BMI View: We expect Thailand's IT market will exhibit robust medium term growth as it continues to strengthen in 2016 after the challenges in 2013 and 2014 that suppressed IT spending growth. We forecast a CAGR of 6.8% from 2016-2019, with the market expected to reach a value of THB220.1bn in 2019. There will be considerable opportunities across all three IT market segments, but we highlight the retail hardware market and cloud computing services as the stand out opportunities. The strong household income growth forecast will enable vendors to target sales to both first-time buyers and multiple device households right across Thailand, while investments in datacentre and network infrastructure, alongside increased supply of solutions...
BMI View: Political risks will remain a hindrance to construction activity in Thailand over the long term following the military government's rejection of the draft constitution, which underscores the country's uncertain political outlook. With the junta expected to remain in power until 2017, large-scale public transport infrastructure projects are expected to benefit, driving construction activity over the near term.
Forecast and Latest Updates
We forecast Thailand's construction register real growth of 14.8% and 4.3% in 2015 and 2016 respectively. The expected growth surge in 2015 is largely owing to low base effects from 2014.
Long-term political risk will weigh on private construction activity,...
BMI View : In global terms, Thailand ranks as a medium sized and fairly rapidly growing market for insurance. Long standing trends should support steady rises in premiums in both the life and the non-life segments. The slowing of the economy appears not to have had an overly adverse impact on either segment.
Thailand Medical Devices
BMI Industry View: A strained public healthcare system could affect market growth, along with the current uncertain political situation and the changes it may bring. We expect the market to rise at a CAGR of around 12% during the forecast period, with imports supplying much of the market. Medical tourism will remain a key driver of growth but the political situation, if prolonged or takes a turn for the worse, could very well impact the economy and this projected growth.
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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...
Oil & Gas
Thailand Oil & Gas
BMI View: Above ground risks continue to weigh on the outlook for investment in the exploration and production necessary to reverse the current trend of declining reserves and production of both oil and gas. Despite untapped offshore potential, Thailand's dependence on imports is expected to grow as consumption, particularly of natural gas, accelerates and domestic output stagnates.
BMI View: Thailand's petrochemicals industry is expanding downstream capacities, while diversifying feedstocks, in order to shore up margins and add value to output. However, political risks will remain crucial in 2016 as the country approaches election time, which brings with it potential flashpoints that could revive the turmoil of 2014.
Thailand will see growth in output in 2016 due to the ramping up of petrochemicals capacities in 2015, including 250,000tpa of phenol, 15,000tpa of acetone. 90,000tpa of TOC Glycol, 115,000tpa paraxylene, 115,000tpa benzene and 20,000tpa orthoxylene. Meanwhile, Thai crackers will raise naphtha as a proportion of their feed in order to capitalise on lower naphtha costs as well as hedging against the impact of depleting gas resources.
Further expansions are expected in coming years. In...
Pharmaceuticals & Healthcare
Thailand Pharmaceuticals & Healthcare
BMI View: Developing into a regional hub for pharmaceutical R&D will remain a challenge for Thailand. The government has yet to implement a national level strategy to foster the sector's growth and is unlikely to do so in the short term as the military junta focuses on staying in power. As such, funding constraints, limitations in scientific human capital and low levels of investment into research by domestic firms will persist, weighing on the sector's R&D prospects.
Headline Expenditure Projections
Pharmaceuticals: THB145.5bn (USD4.5bn) in 2014 to THB152.9bn (USD4.4bn) in 2015; +5.1% in local currency terms and -1.1% in US dollar terms.
Healthcare: THB581.7bn (USD17bn) in 2014 to THB621...
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.
Thailand Real Estate
BMI View: As the Thai economy continues a tentative recovery, we have an increasingly positive outlook for the commercial real estate sector. Rising consumer confidence and private investment, as well as increased government investment in infrastructure, should support growth in the industry in the medium term. Competitive property prices, resilient yields and development in the service industries mean that commercial property is overall an attractive investment.
Thai economic growth suffered in 2014 and the early part of 2015 as a result of military intervention in 2014, which dampened domestic demand, and the global economic slowdown. However, in the second half of 2015 growth began to pick up. We see developments in the broader economy as having positive ramifications for the commercial property market, and we forecast increasing rental rates and occupancy levels over...
BMI View : Despite our grim outlook for Thailand's political and economic situation over the next few years, we believe that supportive energy policy and regulatory environment, combined with the government's strong commitment to diversify the power mix, will continue to attract investment into the country's non-hydro renewables industry. Growth will be driven by particularly strong expansion in the solar segment, with notable additions coming from biomass and wind.
BMI View: Thailand's economy is on the road to recovery despite 2014's military coup and a slowdown in the China. Growth in income levels have successfully boosted household spending during 2015 and increasing numbers of Thais are reaching middle income status. As a result, we expect more purchases of non-essential goods, as well as a growing familiarity and preference for international brands. Tourism will continue to play a vital role in not only the retail sector but also in the country's economy as a whole.
The Thai economy is on the road to recovery after a turbulent year characterised by the military coup and China's slowdown. As South East Asia's second largest economy, we retain a positive outlook for the economy during our forecast period, with real GDP growth forecast at 4.0% in both 2016 and 2017. We expect this level of growth to not only...
BMI View: We expect continued robust growth at Thai ports in 2016, but this is down as much to the base effects of a developing economy and investment in the countries ports rather than a strong outlook for the country on an economic and political basis. The military junta will now be in power until 2017, and, as a result, political tensions will continue to weigh on the investment climate, and consumer and capital spending on containerised imports will be hit. On the exports front, these have been falling thanks to low commodity prices globally.
Headline Industry Data
Gross tonnage at Laem Chabang, Thailand's largest port, is set to rise by 3.0% to 75.64mn tonnes in 2016, and will average growth of 4.1% a year over our medium-term forecast period to 2020. 2017 growth will be 4.7%....
BMI View: In 2015, the two major developments in the Thai telecoms industry pertain to the mobile sector, where the SIM registration drive which lasted till August saw a sharp decrease in prepaid subscriptions, although the extent to which operators were affected differed for various reasons. In addition, the 4G spectrum auction scheduled to take place in November 2015 will see operators investing in valuable spectrum which will enable them to expand their LTE networks and range of value-added-services (VAS) without having the state-owned operators taking a cut as per the previous BTO-concession model. However, the lack of regulator independence and the presence of political agenda in telecoms still inhibit the development of the industry.
|Operators Will Focus On 3G/4G Networks For Recovery From SIM Registration|
BMI View: Thailand's tourism industry has proved highly resilient, with arrivals continuing to increase over the course of 2015 despite significant security concerns following the bombing in Bangkok earlier in the year. The country's many tourist attractions, excellent regional and global connectivity and well developed hotel market will continue to attract a broad range of international visitors over our five year forecast period, ensuring continued growth in hotel and restaurant industry value and tourism related spending. We do note however that there is some potential for growth to be derailed should domestic political tensions escalate in the run-up to elections, which have once again been delayed until 2017.
BMI View: We are maintaining our view of the Thai water sector, as the underlying fundamentals remain broadly unchanged. However, we would highlight that the severe droughts seen earlier over 2015 are resulting in a spate of government driven investments into basic infrastructure which will offer significant opportunities over the longer term, and improve the quality of the service.
The severe water shortages seen in much of the country, and the concomitant water rationing announced by the government, has led us to revise our production forecasts for 2015 and the initial part of 2016. However, renewed rainfall and increased investment into basic infrastructure will see growth resume in 2016.
The emphasis on water consumption reduction and more conservative usage habits in the wake of the...