Big business expresses concern at economic slowdown

While acknowledging that SMEs are the most affected by Thailand’s continuing economic woes, major corporations are also feeling the pinch
 
The Thai economy is experiencing a continuous slowdown, with the World Bank recently revising its 2024 economic growth forecast for Thailand down to 2.4%.

The economic slowdown has clearly affected entrepreneurs, especially SMEs. And now concerns about the business sector are extending to big corporations.

Chaiwat Kovavisarach, CEO of Bangchak Group and managing director of Bangchak Corporation, notes that in the current economic situation, Bangchak must balance its investment plans. While the company usually plans for long-term business trends, short-term operations must consider factors causing volatility, such as global crude oil prices. Therefore, Bangchak needs to be prepared for short-term operations while keeping an eye on long-term trends.

Bangchak aims to balance domestic and international investments, he explained. Domestically, the company is advancing its investment in the construction of a sustainable aviation fuel (SAF) production unit from used vegetable oil.

Chaiwat commented that the economy in the second half of 2024 is expected to improve compared to the first half due to the delayed disbursement of the government budget by seven months. With the budget now being disbursed, the economic momentum is likely to shift.

Previously, two main economic drivers were missing: 1) investment and 2) government spending. As these two drivers are reintroduced into the economy, it is believed that the momentum in the second half of the year will improve. Increased investment in both areas is expected to circulate within the economy, gradually leading to better economic conditions. Additionally, government policies to stimulate the economy in the second half of the year should help initiate a recovery.

Cautious business management

Nava Chantanasurakon, managing director of Sahaviriya Steel Industries Public Company Limited (SSI), said that the less-than-expected economic recovery has affected SMEs, leading to factory closures. Sahaviriya recognises that these impacts also affect their group of companies.

Private sector discussions are currently intense, he added, as big business views the Thai economy as fragile. Although it is still growing, the growth rate is very low compared to other ASEAN countries. Therefore, organisations must be managed cautiously.

“Business management during this period requires careful risk management. Despite the opening of new factories to supplement the closures, the situation remains worrisome. However, this economic crisis is not expected to reach the severity of the 1997 financial crisis, the so-called ‘Tom Yum Goong’ crisis. If it were to reach that level, the consequences would be devastating,” Nava said.

But with the country facing high household debt, a 10% drop in real estate sales and a 20% drop in car sales, economists fear a potential crisis similar to the 1997 Goong crisis. Nava hopes it will not reach that point, as Thailand’s fundamentals are still strong.

However, SMEs are particularly troubled by limited access to funding. The government is trying to assist through interest rate measures, and Thai banks are expected to start adapting, recognising the importance of longstanding customers who have endured hardships together.

Overcoming rising costs

Paul Kanjanapas, CEO of Impact Exhibition Management Co., Ltd., operator of Impact Exhibition and Convention Centre, is more optimistic, saying that IMPACT's overall business performance in the first half of this year has grown as targeted.

The restaurant business segment, however, has been affected by rising costs. Strategies to increase revenue have been implemented, including adjusting recipes to better suit consumer tastes and planning kitchen operations more efficiently. The company is also enhancing current products and introducing new ones to target the premium market and increase income.

Advice for SMEs: Focus on strengths

For SMEs, which are currently facing challenges, focusing on core strengths is essential. Large-scale exhibitions like Thaifex in May saw a significant number of domestic and international exhibitors. SMEs can use these events to showcase their products, explore new innovations, and find ways to sustain their businesses.

“From the perspective of big corporations, SMEs facing challenges from decreased consumer spending should concentrate on their strengths. Avoid spreading efforts too thinly, as this can dilute attention and effectiveness. Focus on areas where you excel,” Paul said.

Promotions to boost Thai consumer spending

Pawatt Ongvasith, CEO of Veranda Resort, stated that in the first half of the year, most tourism operators have benefited from an influx of over 17.5 million foreign tourists and the aim is to reach at least 35 million for the entire year.

But the weak Thai economy means Thai people are travelling less frequently. To address this, Veranda Resorts is differentiating itself through marketing activities, including a 0% interest payment programme. They believe they might be the only hotel group offering such a promotion to support Thai consumers who want to travel but cannot afford to pay upfront.

Weak grassroots economy affects big corporations

Buranin Rattanasombat, COO of New Business and Infrastructure at PTT Public Co., Ltd. and president of the Marketing Association of Thailand (MAT), said that the economic slowdown in consumer spending is also impacting large corporations are also feeling the impact. While big corporations have more financial resilience, they can still face difficulties if their foundations are weak.

Big corporations need to support grassroots businesses in two ways: First, by partnering with others to expand internationally. However, it is observed that the corps often lack collaboration within the same sector due to similar business models. Second, there should be a ‘Team Thailand’ approach where big corporations collaborate to expand overseas markets while mentoring SMEs, giving smaller businesses a chance to grow.

Change and innovation needed

To survive, big corporations need to do two things: First, change and adapt, and second, use innovation to strengthen their operations and transform into what they aspire to be.

“Whether small, medium, or large, companies need to change and incorporate innovation to transform their businesses. Without innovation, new developments cannot be achieved. In this economic climate, it’s advisable to work in groups,” Buranin said.