The confidence of Thai business leaders remains well below the level seen before the floods in late 2011, according to the Grant Thornton International Business Report.While business optimism rose to a net 22% in this year's second quarter, up from 14% in the first quarter, this was well below the levels seen in the first three quarters of 2011 when optimism averaged 42%. Since then, quarterly optimism has averaged just 16%.
Optimism has been more measured because of the initial effects of the floods, the neutral performance of major world economies and trading partners, and worrying domestic developments such as the effects of the rice pledging scheme on the economy, rising household debt and the fear of a lack of transparency in mega infrastructure projects.
Businesses are also less confident about growth in their operations. Only 28% expect revenue to grow, while 28% see profits climbing over the next 12 months, but this compares with 56% and 52% respectively in the same quarter of 2011.
Profitability expectations across 2011 averaged 50%, compared with 39% over the past four quarters.
"Thai business leaders are being pragmatic. Internationally, growth in the major economies is still anaemic, China continues to slow, and central banks are starting to test markets about a possible reduction in their stimulus measures," said Ian Pascoe, the managing partner at Grant Thornton Thailand.
Locally, companies are feeling the full effects of the rise in the minimum wage and household debt is increasing markedly.
The rice pledging scheme is being continued by the government despite huge losses and possible long-term damage to farmers.
There is also concern over the feasibility and funding of some transport projects, while the central bank is lowering gross domestic product estimates.
The slowdown in regional heavyweight China is also apparent in the research, with only 4% optimistic about the economic outlook, down from 19% in the first quarter.
It is no coincidence that falling demand has emerged as a major growth constraint Thai businesses are reporting, cited by 51% of respondents over the past four quarters.
However, the most significant constraint was given as economic uncertainty at 60%, well above both the Asean average of 43% and global average of 41%.
While key export markets such as the European Union remain weak and the slowdown in China has affected Thailand, exports climbed by 8.3% in the first quarter from the same period last year.
This can be attributed to the improvement in Japanese business optimism that helped balance the negative China effect on Thai manufacturing.