The research centre under Krungthai Bank noted the profitability of local SMEs has deteriorated over the past 15 years, based on its study covering 2010-2024. In particular, when SMEs are hit by economic shocks, vulnerabilities tend to accumulate, report sthe Bangkok Post.
Many Thai SMEs have yet to fully recover in the post-pandemic period, even in high-potential sectors such as tourism and electronics.
Over the past 15 years, SMEs have generally faced three key challenges: low profit margins, liquidity shortages and high debt levels.
The gross margins of businesses have continued to decline throughout the period, contributing to tighter liquidity and rising debt, according to Chamadanai Marknual, director of business risk and macro research at Krungthai Compass.
The study also found the return on assets (ROA) of SMEs has continued to trend downward for the period.
Although business performance has improved since the pandemic, overall ROA remains below pre-pandemic levels, including in high-potential sectors, reflecting weaker competitiveness and a gradual erosion of the competitive position of SMEs.
Mr Chamadanai said the recovery of tourism businesses, one of the country’s key economic drivers, has been uneven and recorded the highest volatility among major industries.
Given structural weaknesses and declining competitiveness, SMEs continue to face margin pressure due to intense price competition, particularly in the mass market segment. This results in liquidity shortages and higher debt levels, leaving many SMEs trapped in a debt cycle, he said.
However, the study found many SMEs are attempting to address these challenges, with a large number participating in debt relief schemes offered by government agencies and financial institutions. While liquidity support and debt relief measures remain necessary, they are insufficient to strengthen the SME sector in the long term, noted Krungthai Compass.
"Major surgery, namely business model transformation, is essential to help SMEs achieve a turnaround," Mr Chamadanai said.
Beyond financial assistance, transforming business models towards higher value creation and greater penetration of niche markets will be crucial to strengthening Thai SMEs, he said. Such transformation requires government support through policy measures such as Board of Investment incentives, capability enhancement funds and mentor-mentee programmes to upgrade SMEs across the entire supply chain, said the research house.