Following the Tsunami of 2004 and the 2008 financial crisis, Thailand’s economy bounced back relatively quickly. It was a different reality following the Tom Yam Kung crisis of 1997, which resulted in the financial collapse of the Thai baht. The ramifications of this crisis are still felt today, as evidenced by the unfinished Sathorn Unique Tower (the ghost tower) in Bangkok.
Will the COVID-19 crisis be more like the crises we encountered in 2004 and 2008 – a quick recovery – or can we expect more severe consequences like the Tom Yam Kung crisis? Based on my research with the Global Entrepreneurship Monitor over the years, the commonalities between our current crisis and the situation from 22 years ago point to a difficult recovery.
About 40% of all adults in Thailand are involved in entrepreneurship in some way. This includes those running micro-businesses and informal businesses. As the graphic illustrates, Thailand generally has a high number of Total Early Stage Entrepreneurs (TEA), defined as the percentage of the 18-64 population who are either a nascent entrepreneur or owner-manager of a new business, not older than 3.5 years.
There was a noticeable TEA dip in 2013. You may recall there were protests in Thailand at this time which involved a shutdown in Bangkok, businesses closing, followed by a military takeover. Then there was another dip in 2015. One interpretation is that when the protests ended and businesses re-opened, there was a desire to get back to growing companies, but unfortunately many entrepreneurs faced a difficult environment and in 2015 decided against starting up.
Unfortunately, I think that it will take a long time to recover from COVID-19. This past May the unemployment rate in Bangkok was nearly 10%, mainly because of the loss of work from the measures to slow the spread of the virus. Sentiment among CEOs is negative: according to a recent Krungthep Thurakit newspaper survey, the majority felt that the COVID-19 crisis would have an even more drastic impact than the Tom Yam Kung crisis as the outbreak has disrupted businesses and society as well as daily life on a global scale.
Regions like Phuket or Koh Samui, which are overly dependent on tourism, especially on international tourists are hard hit. Some 85% of Phuket’s GDP is hospitality-related, nationwide unemployment in this sector rose to 6 million alone by the end of April. If the country can successfully stimulate the tourism sector, the economy stands a chance to recover sooner.
People are not spending money as they are saving for just essential items. Those selling non-essential goods will particularly be impacted. In a survey by YouthCo:Lab and UNDP among youth entrepreneurs in Thailand and other Asia-Pacific countries, 88% said they have experienced reduced customer demand, 1 in 3 youth reports a major slowdown and 1 in 4 have stopped entirely.
I do want to conclude on an encouraging note. The final bounce-back in this graphic can be attributed to international trade agreements and the start of the ASEAN Economic Community AEC in 2016 that resulted in more businesses being formed that had an internationalization component. Many former local street vendors discovered entrepreneurial opportunities in selling goods and services across the border. They demonstrated a flexibility and resilience to adapt given the circumstances. Throughout my time studying entrepreneurs in Thailand, I have seen this characteristic on display.
Many are talking about a new business normal. I believe that while there will be some difficult times, Thai entrepreneurs are well positioned to adapt to whatever this new normal will look like. They will ultimately create opportunities. This will benefit not only the Thai entrepreneur individually, but the entire entrepreneurial ecosystem in the country.
– Ulrike Guelich
Ulrike Guelich is a Professor at Bangkok University and the leader of the Global Entrepreneurship Monitor Thailand team. For more information, watch the following recorded webinar. Learn more about the Global Entrepreneurship Monitor.