Many small and medium-sized enterprises (SMEs), the backbone of Thailand’s economy, are struggling with crushing debt loads that could force them out of business as the latest wave of Covid-19 infections dims the prospects for an economic recovery.
“This round is much worse than last year, and millions of operators are suffering,” said Mr Sangchai Theerakulwanich, chairman of the Federation of Thai SME, who submitted a proposal last month for the government to boost support to smaller businesses. “If the situation is prolonged to the end of the year, the nation will be in crisis, with 80 per cent of us going bankrupt.”
Thailand’s SMEs, many of them concentrated in the tourism industry, have been hit especially hard since the country closed its borders last year, sending the economy to its deepest contraction in more than two decades. The situation has worsened with daily cases and deaths at record levels, leading the government to impose fresh restrictions in late June.
The Bank of Thailand has called repeatedly to boost liquidity to SMEs, which are seen as crucial to any economic recovery.
So far, though, efforts to channel billions of dollars of credit at low interest rates, institute loan-payment holidays and offer credit guarantees have failed to breathe life into the sector.
“Credit growth to large corporates has been growing at over 10 per cent a year. Even for the household sector, credit growth has also been growing at about 4 per cent a year,” central bank governor Sethaput Suthiwartnarueput said in March. “The segment where credit growth has been shrinking is the SMEs.”
Thailand had 3.1 million SMEs as of last year, employing 12.7 million people, according to government data. The Thai Chamber of Commerce believes the real number of SMEs could be as high as 5 million, as many smaller operators do not register with the authorities.
The central bank last month slashed its economic growth forecast for this year to 1.8 per cent, from 3 per cent previously, amid weak domestic consumption and repeated cuts to the tourism outlook.
Before the pandemic, tourism contributed about 20 per cent of the country’s gross domestic product – about double the global average – but the bank now expects only 700,000 visitors to enter Thailand this year, down from almost 40 million in 2019.
Ms Patcharabhorn Salacheep, 34, who owns a body-painting business catering to foreigners, shut her Pattaya and Phuket outlets last year as the borders closed and tourism withered. After shedding 70 per cent of her staff, she still has three shops in Bangkok’s Chatuchak weekend market but earns only about 10 per cent of what she used to.