Thailand is in only the early stages of a long-lasting economic crisis that already has seen 70 percent of workers lose 47 percent of their monthly incomes and left 11 percent of small businesses on the verge of closing forever, a new report from The Asia Foundation concludes.
Based on two months of phone surveys of randomly selected individuals and businesses in every region of the country, the exhaustive report catalogs the impact of the Covid-19 pandemic on micro- and small-sized tourism businesses and small manufacturers, 31 percent of whom told the foundation they expect to shut down within six months or less.
“Survey results suggest that Thailand is in the early stages of an economic crisis that could far outlast the pandemic,” said Thomas Parks, the TAF’s Thailand representative and lead author of the report released Wednesday. “The severe economic shock of this pandemic will only deepen existing inequalities and may fan smoldering political tensions.”
While the recession that actually began in the last quarter of 2019 has been felt at all income levels, Parks said the poor and less-educated have been hit the hardest.
More than 84 percent of people with only a primary education have seen their incomes decline by an average of 63 percent. By comparison, 36 percent of people with advanced degrees have lost income, and the average decline is 21 percent.
“This regressive economic impact is a major concern for a country with already high levels of inequality,” he wrote in an Aug. 19 blog post.
The report, based on surveys in late May and throughout June, shows that while the tourism sector has been heavily affected, the economic damage from the pandemic is much broader.
As of June, 70 percent of small manufacturers, most unconnected to tourism, were making half or less of their pre-COVID earnings. Only 68 percent of businesses interviewed were operating normally, despite the full relaxation of lockdown measures, the report said.
Tourism businesses, meanwhile, have extremely low confidence in the future, the foundation found.
“Given that 75 percent of tourism interviewees had no income at all, or less than 25 percent of their pre-Coivd revenues, these businesses were desperately waiting for the return of visitors, and doing all they could to cut their expenses,” the report concludes.
More than 60 percent of business owners said they were at risk of closing permanently as domestic tourism has been nowhere near the level needed to fill the gap left by international tourists.
“Most tourism businesses realized that visitor levels will not return to pre-COVID levels until at least 2021, but more than a third did not think that they could stay in business that long,” the foundation said.
Surprisingly, micro and small businesses are faring better than medium-sized enterprises.
“Case study interviews indicate that businesses with higher recurring costs are more vulnerable to the crisis,” the report said. “The businesses that have higher recurring costs such as rent, leasing of equipment, and/or a large staff, have more urgent need for working capital. By comparison, micro businesses and family-run businesses, and especially those that own their premises, and operate in low-cost regions, are more likely to be able to survive over many months of near zero revenue.”
But businesses offering non-essential products and services are in the worst shape, the TAF found.
“As incomes contract, and Thai consumers’ confidence plummets, people are restricting their spending to only essentials such as food and household costs.”
Businesses that sell items considered non-essential, such as custom-made T-shirts and herbal products, have not seen a sales recovery. The foundation said they will either have to diversify or shut down.
The government has made a great show of the effort and money being spent to prop up the economy, but it’s not been as successful as intended, the foundation concluded.
Some government programs are not reaching the small businesses and workers that most urgently need assistance. Furthermore, many small businesses aren’t even applying for soft loans, whch so far has reached only 15 percent of medium-sized or smaller firms. Reasons cited for not applying ranged from lack of confidence in the future, even with a loan, and fear of piling on even more debt.
Overall, however, Thais overwhelmingly are giving the government good marks for its handling of the pandemic, saying they approved of the way the coronavirus was eradicated and that initial cash handouts addressed most serious needs.
However, the foundation also determined that if the virus re-emerged and the government again locked down the country, the results would be “catastrophic”.
“Small businesses are still struggling to recover from the first lockdown. Many business owners said that they would be not able to survive a second Covid-induced lockdown of similar length,” the report concluded. “ For this reason, businesses were generally supportive of the government’s public health response, and the closure of international borders.”
Thailand’s economic recovery, the authors concluded, “will be shaped by the extent to which people feel safe in leaving their homes, and are confident to start spending again.”