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

  • While Thailand's military leaders have taken tentative steps to restore civilian rule, a return to a well-functioning democracy is far from assured. The political divide will remain unresolved, and the potential for renewed instability will continue to undermine the country's long-term economic growth potential.

  • Still soft domestic demand and weakness in external performance continue to keep the Thai economy sluggish. Consequently, we are downgrading our 2014 real GDP growth forecast to 0.7%, from 1.6% previously. That said, we expect growth to rebound to 4.1% in 2015 on the back of ongoing efforts by the junta to revive the economy amid renewed political stability.

  • We forecast Thailand's budget deficit to narrow from an estimated 2.6% of GDP in 2014 to 2.0% in 2015, as we expect an economic rebound to shore up fiscal revenue,...

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Thailand Operational Risk Coverage (9)

Thailand Operational Risk

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BMI View: Thailand poses moderate operational risks to investors, though the rising cost of labour is a growing concern, as is the country's political instability. Thailand's overall Operational Risk score is boosted by a number of factors, namely its developed logistics network, an open economy and its increasing trend towards economic liberalisation. That said, significant risks do exist, notably the potential for an escalation of the current political violence into civil war, as well as the ongoing separatist violence in the south of the country. For these reasons, Thailand receives a relatively low score of 59.0...

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Thailand Crime & Security

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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 of 50.9 for Crime and Security Risk, which puts it 17th regionally.

Criminal risks in Thailand are moderate by regional standards, and there is no systemic threat to foreign workers in the country. The majority of crimes committed in Thailand consist, as mentioned above, of petty crimes and credit card...

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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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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 73.0 out of 100 for Logistics Risk, ranking seventh in Asia, ahead of Vietnam (11 th), Cambodia (20 th) and Laos (24...

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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 (22)

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 benefits from strong export opportunities and government support as well as an efficient food-producing industry. The sugar and livestock sectors are especially promising; however, the government's interference in the market, especially in the rice sector, will hinder the competitiveness of Thailand's production relative to its Asian rivals. Thailand will remain a key rice exporter but may lose out to secondary exporters owing to growing instability in its trade policy.

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Autos

Thailand Autos

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We have downgraded Thailand's domestic auto sales growth forecast, and expect auto sales to contract 35.0%, a more severe contraction compared to the 30.2% decline forecasted previously. Weak sales for the first nine months of 2014 have been broad based, impacting both passenger cars and commercial vehicle segments. The slowdown is largely attributed to a sluggish economy, weighed down by an uncertain political climate. According to Toyota Motor Thailand, sales for passenger cars and commercial vehicles declined by 45.0% year-on-year (y-o-y) and 30.1% y-o-y respectively. For the overall auto sector, sales contracted by 37.3% to 648,410 units over the same period.

The outlook for the sector remains weak for the remaining months of 2014, and we forecast passenger car sales to contract by 42.0% in 2014. Sluggish demand will largely be attributed to demand coming off a high...

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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: In 2014 political uncertainty and baht depreciation were a drag on spending growth, resulting in uneven growth as the computer hardware and AV segments contracted, but handset sales continued to grow. However, this pattern is forecast to change as the economy strengthens from 2015, and we expect a revival in PC sales, while at the same time the smartphone market is expected to slow as a result of saturation and price erosion. There will also be trends across market segments, for instance, we expect ...

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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...

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Food & Drink

Thailand Food & Drink

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BMI View : The economic damage caused by the Thai political crisis and our expectations that the situation will not improve significantly in the short term have caused us to downgrade Thailand's GDP growth outlook for 2014. 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 an impending slowdown in the country's main trading partner, China, real GDP growth seems likely to...

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Freight Transport

Thailand Freight Transport

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Positive Growth Expected In 2015

Thailand's freight industry will see positive growth in 2015, after a difficult 2014. In terms of cargo volumes, we expect increases in a range of roughly 2% to 7% depending on the transport mode, after a mixed 2014, during which a number of modes experiencing volume reductions. In 2015 the strongest growth rates will be in bulk tonnage handled in the ports and in rail freight; airfreight and road haulage will be somewhat more subdued.

We are forecasting a recovery in Thailand's economic outlook 2015, with GDP set to increase by 4.1%, after an almost standstill year in 2014. According to our estimates, 2014 will have been weaker than initially hoped, with growth of only 0.7%. This was due to a combination of factors. Despite ongoing efforts by the ruling junta to stabilise the political situation and stimulate the economy, the recovery was slow to gain traction....

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Information Technology

Thailand Information Technology

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BMI View: After a growth slowdown in 2013 and 2014 as economic and political uncertainty weighed on consumer and enterprise confidence, we expect IT market spending growth to accelerate in 2015. Over the medium term strong growth is forecast across all IT segments making the Thai IT market one of the largest and fastest growing in the region. Drivers such as high private final consumption and the economy's strong growth trajectory will support the market's expected expansion. In addition, fundamentals such as increasing connectivity and the falling price of devices are enabling a wider range...

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Infrastructure

Thailand Infrastructure

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BMI View: The near-term outlook for Thailand's construction and infrastructure sectors had improved due to greater political and policy certainty. However, at the time of writing the government had just postponed elections from October 2015 to an unspecified date in early 2016, which has the potential to prolong political uncertainty and incite further unrest. Further, the long-term outlook for both sectors remains highly uncertain due to the potential for further project delays, revisions and cancellations from political and financing factors.

Key Trends And Developments

  • The NCPO had said it would hold democratic elections in October 2015. However, in November it was widely reported in the media that Deputy Prime...

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Insurance

Thailand Insurance

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BMI View: Thailand's insurance industry is forecast to show good growth between 2015-2018 having struggled in 2014, faced with a military coup in May and a weakening currency. Total premiums grew by only 1%  in 2014. Nevertheless, we expect growth to continue where it left off in 2013. This is reflected in our forecast for annual average growth between 2015-2018 of 11.7% in Life and 14.9% in non-life. Life will, unusually, continue to be the more dominant line of business representing 68% of total premium. Within non-life, motor insurance...

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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.

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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 the positive development of the nuclear sector in South Korea fuels uranium mining production.

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 instance, we...

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Oil & Gas

Thailand Oil & Gas

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BMI View:  Thailand is expected to remain driven by a strong oil and gas demand far outweighing the domestic production over our forecast period to 2023. With declining oil and gas reserves, we expect long-term oil and gas production trends to remain stagnant or negative, despite a slight increase in the medium-term. However, the 21st licensing round, scheduled for early 2015, poses an upside risk to our current reserves and production forecast. 

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Headline Forecasts (Thailand 2012-2018)
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Petrochemicals

Thailand Petrochemicals

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The Thai petrochemicals industry is seeing more certainty and growth as the political situation stabilises, but BMI's latest Thailand Petrochemicals report warns that political risk will remain a significant factor going forward.

The situation in Thailand has improved in recent months leading to improved performance in the automobile and auto parts manufacturing, agro-industrial exports and overall manufacturing. As such, the country's petrochemicals industry can look forward to a year of recovery in 2015. The crisis has limited the growth potential in Thailand's infrastructure and construction sectors, which are also major petrochemicals consumers, particularly in the polyvinyl chloride (PVC) segment, but like the automotive industry a contraction 2014 will turn to growth in 2015.

The industry should be protected from domestic economic woes with increased exports. Petrochemicals output is...

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Pharmaceuticals & Healthcare

Thailand Pharmaceuticals & Healthcare

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BMI View: Thailand will continue to be an attractive location to international drug makers as a result of its growing domestic pharmaceutical market with an ageing population and improving access to healthcare as well as its position as an entry point into the frontier markets of South East Asia. Japanese pharmaceutical companies such as Eisai in particular, have been attracted to the market and are looking to leverage the region's growth.

Headline Expenditure Projections

  • Pharmaceuticals: THB145.5bn (USD4.5bn) in 2014 to THB153.0bn (USD4.7bn) in 2015; +5.2% in local currency terms and +4.4% in US dollar terms.

  • Healthcare: THB504.2bn (USD15.5bn) in 2014 to...

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Power

Thailand Power

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BMI View:  We are forecasting electricity generation in Thailand to grow by 2.8% in 2015, similar to the growth the country experienced in 2014. Meanwhile, we have moderated our long-term forecasts for electricity generation in Thailand. This is because the country continues to experience challenges in procuring gas supplies and is clearly moving towards increasing its reliance on electricity imports.

We are forecasting electricity generation in Thailand to grow by 2.8% in 2015, similar to growth in 2014. The large source of generation growth in the year will be from thermal generation, followed by non-hydropower renewable generation. We have revised down our long-term forecasts for the Thai electricity sector this quarter as...

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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 regional economic integration continues as well as continued growth in Thailand's tourism sector. However, recent political instability has had a negative effect, both on economic growth and FDI.

There are a number of strengths in Thailand's commercial real estate sector, these include a business environment which is favourable to foreign investors as well as Thailand's geographical location. A number of major international players are present in the market and Thailand also boasts a real estate investment trust (REIT), all of these factors point towards a sector which is fairly developed.

Despite our favourable long-term outlook for the Thai commercial real estate sector, recent political upheaval has had a negative effect on the country's economy. Although a recent return to...

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Renewables

Thailand Renewables

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BMI View : We are maintaining our short and long-term forecasts for non-hydropower renewables generation and capacity in Thailand this quarter as our assumptions remain relevant. Growth in 2015 will be driven largely by the solar sector as conditions for commercial and residential solar energy remain attractive. Meanwhile, our sanguine long-term outlook can be attributed to the unsustainable nature of the country's current energy mix and the increasingly attractive regulatory conditions for renewable.

We are maintaining our 2015 forecasts for non-hydropower renewables generation and capacity in Thailand this quarter as our assumptions remain relevant. Growth in 2015 will be driven largely by the solar sector, with the wind and biomass sectors playing second fiddle. We are also maintaining our long-term forecasts this quarter, and are forecasting...

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Shipping

Thailand Shipping

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Healthy Port Growth Expected in 2015

2015 will be a better year for Thailand's ports than 2014. In the context of a weak economy and a downturn in foreign trade, we now estimate that throughput levels contracted at both the country's main ports, Laem Chabang and Bangkok in 2014. But we are projecting a healthy recovery, with growth rates between 2% and 6%, in 2015.

We are forecasting a recovery in Thailand's economic outlook 2015, with GDP set to increase by 4.1%, after an almost standstill year in 2014. According to ourt estimates, 2014 will have been weaker than initially hoped, with growth of only 0.7%. This was due to a combination of factors. Despite ongoing efforts by the ruling junta to stabilise the political situation and stimulate the economy, the recovery was slow to gain traction. Negatives included a subdued export and investment performance, along with depressed construction and...

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Telecommunications

Thailand Telecommunications

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BMI View:  Despite considerable uncertainty regarding the military-backed government's intentions regarding the auction of 900/1800MHz spectrum, sentiment towards foreign investment and plans for the long-term roles of state telecoms agencies TOT and CAT Telecom, the Thai telecoms sector has not lacked ambitious investment initiatives during the first nine months of 2014. AIS has unveiled a plan to develop a nationwide broadband network to rival those of TrueOnline and TOT, while True has committed to further expansion of its 3G/4G networks as well as its core wireline infrastructure. More recently, DTAC committed to a long-term expansion...

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Tourism

Thailand Tourism

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News: On July 30 2014, US District Judge Jed Rakoff in Manhattan ordered local lender Bank of America to pay a fine worth USD1.27bn for fraud over defective mortgages sold by its unit Countrywide Financial Corp. The judge also ordered former mid-level executive of Countrywide Rebecca Mairone to pay USD1mn. The judge found Mairone's 'leading role' in the fraud and called some of her testimony 'implausible'. Mairone was the only individual charged in the fraud. The judge ruled after a jury in October 2013 found the bank accountable for the sale by Countrywide of bad loans to state-controlled mortgage firms Fannie Mae and Freddie Mac.

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Water

Thailand Water

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BMI View: This quarter we have revised and expanded our forecasts for the water sector. We now cover non mains consumption and treated wastewater. 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.

On March 12 2014, the central bank cut the benchmark policy rate by 25 basis points to 2.00%, the lowest since January 2011. Given that the Thai economy remains relatively fragile, we expect the benchmark...

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