After coronavirus outbreak reached its the pandemic status last week, it has led to a further downturn in the global economy, resulting in much greater risk for most Thai businesses that rely on exports/import as they prepare themselves for a stagnating world market.
Businesses are affected to various extents based on the geographical regions they export to:
- Organisations that primarily export to China: These businesses have been heavily affected since the initial outbreak but are currently on the road to recovery in line with China’s current situation. Businesses in this category include the production of intermediate goods like plastic pellets, textile fibres or local fruits.
- Companies that primarily export to the US, the EU or Japan: As these regions are currently experiencing large-scale outbreaks, these businesses are likely to face further challenges down the road. Businesses in this category include processed chicken, processed seafood, intermediate electronics and final goods.
- Companies that rely on its export to China, the US, the EU and Japan: These businesses have been bearing the burdens of markets undergoing secular stagnation and are likely to be affected till everything is settled. Examples of this group include canned vegetables, printed circuit boards, electrical appliance parts, vehicle tires and mattresses.
In addition, businesses that are less reliant on exports may also need to prepare themselves to cope with the declining economy, as external economic factors are likely to place pressure and further weaken the domestic market in the second quarter. While businesses utilising raw materials (e.g. food, beverage, agricultural products) within the country may still be able to reap profits, stagnation within the country from combating the virus may aggravate the woes of the Thai agricultural sector to a greater scale this year. On the other hand, those that rely on imported goods or raw materials are expected to be on gradual recovery in sync with China. Though producing or importing goods for sales and distribution remains regular, market conditions are not supportive of business wealth. Thus, working capital is required to sustain business operations until things revert to their prior statuses.
As can be seen, a stagnant market is the biggest issue that Thai businesses must face as it will be difficult to market their products regardless of where they’re trying to send them. Conversely, businesses that revolve around food, beverage, cleaning products, daily necessities and the raw materials needed for their productions can all be expected to grow amidst this crisis. As for businesses concerning other goods that are unlikely to be in demand over the next three to six months, they will have to accept the prevailing global circumstances and patiently wait for everything to return to its normal state. Businesses such as hospitality and luxury goods have taken the biggest hit, as tourism and emotional spending is a big key driver for them. As hotels and malls are starting to close temporarily, sales are likely to drop close to zero in the coming months.
China's recent recovery and the spike in medical supplies export may be a display in its potential to rescue the world's economy from this crisis. This will in turn benefit exports from Thailand as we can provide intermediate goods to support such productions in China, such as rubber, synthetic fibres, plastic pellets and chemicals. This will also include goods under the category of food and other local products, which are likely to make a significant recovery whether it be Thai fruits or medical equipment.
Amidst this lockdown, businesses such as restaurant/food retail and consumer products have been pushing their e-Commerce channels to the maximum potential. Therefore, food delivery and e-Commerce businesses have been taking full advantage of this situation.
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