August 5, 2024
BANGKOK – Economic issues plaguing Thailand, such as high household debt and tight liquidity were affecting both people and businesses, and experts are comparing the current economic situation to the 1997 financial crisis, also known as the Tom Yum Kung crisis.
Assoc Prof Montree Socatiyanurak, director of the Executive Master of Science in Management programme at the National Institute of Development Administration (NIDA), explained that the current economic crisis differed from that of 1997, especially regarding its impact on various sectors of the economy.
Montree explained that Thailand’s economic structure resembles a pyramid, with small businesses and micro-enterprises at the base, followed by the middle class, and large companies and high-income individuals at the top. The current economic problems are concentrated at the base of this pyramid, affecting many small businesses and micro-enterprises.
This makes economic recovery challenging, as addressing issues at the base requires significant effort. In contrast, the 1997 crisis primarily affected the upper levels of the pyramid, with less impact on the base.
Consequently, recovery at that time was quicker because the lower levels were less affected and had the means to help restore the economy, he said.
Currently, the economic issues at the base are severe, with households representing 91% of GDP. Small and medium-sized enterprises (SMEs), particularly micro-enterprises, are facing high levels of non-performing loans (NPLs), making banks cautious about lending, he said, adding, the delay in budget disbursement had also led to liquidity shortages.
The critical issue now is the liquidity crisis faced by SMEs, which often rely on informal loans for operations. Data shows that of the approximately 2.5 million micro-enterprises, 53% can access formal loans, while 11% depend on both formal and informal loans. Around 35% rely solely on informal loans, leading to high interest rates and increasing the risk of business closures.
“The current economic problems are at the base of the pyramid. If this base collapses, it can affect the entire pyramid. SMEs and micro-enterprises, which employ more people than large companies combined, have a significant impact on the broader economy,” Montree said.
He criticised the 10,000 baht digital wallet scheme, saying it did not adequately address the needs of SMEs and small retailers. The project allows small retailers to receive payments digitally but does not help them with cash flow, which is crucial for their operations. Thus, the project may benefit large corporations more than small businesses, he warned.
“The digital wallet project, which it is claimed would have a significant economic impact, should be evaluated based on how well it facilitates money circulation within the economy. For example, if people use it to shop at convenience stores, the money circulation might be slow because these stores often take 3-4 months to pay their suppliers. In contrast, a project that encourages transactions between small and community businesses, bypassing convenience stores, would likely result in better circulation of money,” Montree stated.