Business sentiment plunges to lowest level in a decade

The deteriorating confidence was common among respondents in both manufacturing and non- manufacturing sectors, as well as in almost all sub-indices, especially order books, production and performance, while the three-month expected BSI decreased from the previous month to 50.5 due mainly to concern over the Covid-19 coronavirus.

The central bank said most respondents in the manufacturing sector were much less confident in their order books, production and performance, especially those in electronics and electrical appliance sectors. Their production sub-index dipped due to an insufficient inventory level of raw materials, which were primarily sourced from China. As a result, their performance sub-index also plunged. 

The continuous deterioration of order books and performance sentiment resulted in an increasing number of respondents seeing worsening liquidity conditions, reflected in the liquidity sentiment index which decreased from last month and remained below the 50 threshold for five consecutive months. Nevertheless, most respondents, either from small, medium or large businesses, still received sufficient credit from financial institutions.
Meanwhile, weaker confidence in the non-manufacturing sector was mainly driven by tourism-related sectors. Both transportation and hotel and restaurant sectors showed a pessimistic view of both foreign and domestic bookings because of the Covid-19 situation. Consequently, the service volume sub-index also dropped sharply.
The transportation sector was highly concerned about the depressed state of expected bookings and the electrical appliance sectors expected foreign orders to drop. In addition, the expected automotive sector production sub-index plunged as raw material shortage was likely to get more severe if the virus situation did not improve, the central bank added.
Domestic factors such as weak purchasing power and intense competition were still among the top business constraints, which made it more difficult to adjust prices. As a result, the expected inflation in the next 12 months would be stable at 1.6 per cent.
Last week, central bank senior director Don Nakornthab warned that economic growth might experience its slowest pace this year, or could grow below 1 per cent from 2.4 per cent last year. He cited the impacts from Covid-19, the annual budget delay and severe drought. He was also concerned about labour markets as large numbers of people working in tourism-related industries were hardest hit by the decline in the number of tourists, who were concerned about the coronarvirus spreading globally.
The government has pledged to launch additional stimulus packages to shore up the economy, but the stock index has also plummeted, moving closer to its lowest level in five years.