2023 Thailand’s Economic Outlook

Dr. Narain Chutijirawong
Executive Director | Clients & Markets
Deloitte Thailand

Tasada Sangmanacharoen
Senior Consultant | Clients & Markets
Deloitte Thailand

Unprecedented events have been challenging for all of us, pandemic, the war in Ukraine, inflation pressures, and hence, aggressively increasing policy rates were seen in various regions. Thailand, is no exception, had increased the interest rate by 0.25% for the first time in August 2022 since the pandemic occurred in order to battle inflation situation. As entered to 2023, Thai economy seems to gain recovery from the resuming tourism and private consumption. Both IMF and the Bank of Thailand also announced that Thailand’s GDP would grow at 3.7% for 2023 amidst the global slow down.

Tourism, known as Thailand’s key engine for economic growth in pre-Covid, is recovering from more relaxed measurements and reopening of the border. As of December 2022, the country had already reached the 2022’s target of 10 million of foreign tourists, mainly contributed by people from Malaysia, India, and Laos, and is expected to reach around 22 million for 2023. In addition, China’s faster-than-expected to reopen the border would also push up number of foreign tourist arrivals.

Cost-of-living crisis, pushed by inflation and production costs, saw improving as Thailand’s headline inflation had peaked at 7.9% in August 2022, decelerated to 5.6% in November 2022, and is expected to return to the target rate at 3% by the end of this year. However, Thailand would still face high energy prices as the country is a net importer of crude oil.

Even though the costs remain high, consumption saw improving, evidenced by higher-than-Covid19-level of private consumption index and recovering over 48% from April 2020 of the index in service area in October 2022.

By comparing our currency to peers, Thai baht depreciated to 38 per USD in October 2022 mainly from the US’s rising interest rate. Recently, Thai baht has been stronger in response to Fed’s announcement in slowing down the US interest rate increase. Thailand Development Research Institute (TDRI)’s forecast in November 2022 also indicated the value 36.87 per USD for 2023.

Looking at industries in Thailand, they are performing in varied directions. Those saw recovering and better-than-Covid19 level are wholesale and retail, department stores with the supports from government scheme, purchasing power from the middle to high income group, and rising tourists. Surge in internet usage also would lead information and communication industry bloom, while changing behavior since Covid will also drive e-commerce, delivery services, and electrical equipment. However, those saw less sign of recovery are internal combustion engine automotive industry due to prolonged semiconductor shortage, high cost of raw material, and rising trend of electric vehicles, while metal industry from the high raw material price which both of the finished steel consumption and import also contracted by 23% in October 2022 (YoY), according to Iron and steel institute of Thailand.


Thailand’s 2023 Key risks and opportunities

Key risks that could deter Thai economic recovery are geopolitical tensions (e.g. war in Ukraine, China-Taiwan tension), resulting in supply disruption or rising energy prices and costs of raw material. FED and other regions to further increase interest rate in response to the inflation would also lower purchasing power, together with, Thailand’s current high level of household debt (88.2% to GDP as of November 2022). China’s economic recovery which might recover slower-than-expected also saw influence on tourism sector and Thai export. However, the bright sides are rising tourist arrivals from other regions’ reopening their borders, recovery in domestic consumption after Covid, and the relocation of production from China.


Looking ahead for 2023 Business Trends

Digital transformation and ESG are two major global trends for all businesses regardless of which industry they are in. It is vital that business leaders need to comprehend and make the most use of these trends.

Digital transformation is no longer an optional for business, as pandemic pressure and consumer trends change to be more digital. As recent Deloitte Tech Trend 2023 articles, the impact of emerging technology is widely affected organization in both challenge and opportunities.

Startups’ mantra – move fast, fail fast and break things – might not be applicable to established companies, as they don’t have any legacy to protect. Successful businesses must realize that they can’t risk breaking thing, as Startups, in pursuit of new. It is crucial that leaders need to balance their digital transformation initiatives from modernizing its core business technologies/processes to extending its business capability or even reimagine their business models.

Hence the roles of leadership are vital in driving successfully digital transformation initiatives. Leaders is in the position to foresee what the business trends & challenges in the future, then set the vision of what their business would be. This aspiration and ambition will be the key to define what the role and level of involvement of leaders.

Organizational readiness is another key factors; leadership, culture, structure and capabilities. Leadership in C-suite level must be motivated and capable of executing the vision with positive attitude and willingness to transform. Culture of innovation, take risk must be instilled against those bureaucratic or risk-averse mindset. The proper talents & team structure are needed to be designed supporting the initiatives with the capabilities in scalability and nimbleness.

Both leadership ambition and organizational readiness will help business shape and structure on how they should manage and drive successful digital transformation initiative in a sustainable way.

ESG issues are more crucial at this moment. Tremendous progress recently has been made in standardizing and quantifying measures of organization’s performance on ESG criteria and investor interest in companies that appear to be taking ESG goals seriously is also becoming increasingly prevalent. Different levels of ESG preparation or implementation among organizations, and opportunities to introduce green technologies saw increasingly presence in market. According to Deloitte Thailand’s ESG and sustainability survey 2022, most business leaders prioritize awareness of ESG in the organization and integrating ESG into the corporate strategy. C-Levels tend to spotlight ESG reporting in line with the 56-1 One Report, which has improved disclosure efficiency by presenting how business is operated under ESG. Additionally, 34% of respondents already have sustainable committee to oversee or drive ESG in their businesses. Majority of the respondents also view that better corporate sustainability performance will bring about the top three key benefits: Operational efficiency and cost saving, Brand credibility and image, and risk management.


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