Three quarters Thai Companies Have a Positive Outlook for 2023: UOB Study

UOB Thailand has conducted the Business Outlook Study 2023: Thailand Report, revealing positive sentiments among SMEs and large corporations. The findings underscore the overall business sentiment in Thailand and provide key strategies that corporates can adopt to expedite future growth in the post-pandemic environment.

Tan Choon Hin, President and CEO of UOB Thailand, said, "Our recent study draws insights from 530 senior executives from SMEs and large enterprises across 10 industries in Thailand regarding their business sentiment and perspectives as the country recovers from the pandemic. It is encouraging to see that SMEs and large corporations hold a positive outlook for the country's economic recovery. They express a keen interest in expanding their operations abroad, embarking on digital transformation, and integrating sustainability practices as catalysts for new growth."

Businesses Exhibit Confidence in Performance

75 %, or three in four executives, have witnessed improvements in their business performances in 2023. Notably, the manufacturing and engineering sectors display a higher degree of optimism, with 85 % expressing positivity, followed by real estate and hospitality at 80 %, and consumer goods at 79 %. This positive sentiment aligns with the majority of respondents (74 %) who anticipate a favourable business outlook for 2023.

Regarding revenue growth, the majority of businesses expect consistent increases over the next three years. A remarkable 90 %, or nine in ten businesses, anticipate revenue growth in 2025. Key business priorities for 2023 include tapping into new customer bases (37 %), distinguishing themselves from competitors (35 %), reducing costs (32 %), exploring new revenue sources (30 %), and digitalising their business models (29 %).

High Inflation's Impact on Business Operations and Supply Chains

According to the survey, nine in ten businesses report ongoing challenges due to high inflation since 2022.

61 % note that high inflation has led to increased operating costs, with over half experiencing a rise in raw material expenses (56 %) and a decline in profit margins (44 %).

Moreover, the study reveals that geopolitical conflicts, particularly the Russia-Ukraine disputes, have also disrupted supply chain management across various industry sectors. Over two in five businesses have encountered rising supply costs resulting from high inflation, difficulties in procuring supplies and requirement for just-in-case supplies

Nonetheless, a majority of businesses expect high inflation to subside within the next six months to two years. This positive outlook aligns with UOB's previous assessment that Thai inflation seems to have reached its peak and has been gradually decelerating since 2022, thanks to lower energy prices and improvements in global supply chain and distribution.

Expanding Overseas for Future Growth

The study indicates that nine out of ten respondents have identified overseas expansion as a priority over the next three years.  Businesses are motivated to venture overseas in order to drive revenue growth, enhance profitability, and bolster their reputation. Larger enterprises, particularly those engaged in wholesale trade (96 %), exhibit a heightened interest in expanding overseas. These figures surpass the regional average (89 %) and the Asean average (83 %). Thai businesses have set their sights on Singapore, Vietnam, Malaysia, mainland China, and one in three are planning expansions beyond Asia.

However, businesses looking to expand overseas encounter challenges related to legal and regulatory compliance, tax support, and finding suitable partners to collaborate with.

Digitalisation and Sustainability Practices as Key Drivers of Growth

Digitalisation and sustainability have emerged as two significant global business trends in recent years, and Thailand is no exception. The study highlights that digitalising business operations and adopting sustainability practices contribute to improved company performance and reputation.

In Thailand, nine out of ten respondents (92 %) have adopted digitalisation in at least one department as of 2022, surpassing regional (87 %) and Asean (86 %) averages. The most significant impact of digitalisation has been observed in increasing customer outreach, followed by enhancing customer experience and boosting productivity.

The majority of businesses, particularly SMEs, are actively pursuing substantial digital transformations. Approximately 60 % of businesses are seeking support from banks to provide insights in their digital journey aiming to improve efficiency and facilitate collaborations with the government and third-party referrals.

Regarding sustainability, 96 % of Thai businesses place great importance on implementing sustainable practices. Businesses emphasise that prioritising sustainability enhances their reputation, attracts and retains top talent, and appeals to investors.

However, while over nine in ten businesses claim to have committed to achieving net-zero emissions, only 51 % have successfully implemented sustainability practices. One in three businesses cite concerns about increased costs to customers and the potential impact on revenue and profits as the main barriers to adopting sustainable practices.

Tan concluded, "The pandemic has accelerated the urgency for businesses to enhance their digital capabilities and reshape sustainability practices to remain resilient, adaptable, and profitable in this volatile environment. Businesses that are slow to embrace ESG and digital transformation may miss out on potential business opportunities."