The small and medium-sized enterprises (SMEs) expectation index improved in June for the first time since the country fell into a political tailspin. The rising sentiment adds to signs the economy is on the road to recovery following the end of the political turmoil.
The TMB-SME Expectations Index surveyed from April to June increased to 55.7 points from 51.1 the previous quarter, said Benjarong Suwankiri, head of TMB Analytics, the research unit of TMB Bank.
The bank surveyed 1,000 SME customers across the country.
Monthly expectations for the third quarter surged to 62.2 points in June from 51.7 in the previous month.
Higher SME sentiment was attributed to the end of political turmoil after the military took over administrative power following the May 22 coup. In fact, the monthly index showed that SME operators' worries over the political factor in June slid to the lowest level in six months at 24.9%, compared to 45.6% in May.
"This was the highest level in nine months and the biggest gain since the survey was conducted," he said.
Business operators and consumers have high hopes the country's economy will bounce back in the second half after the National Council for Peace and Order (NCPO) swiftly acted to deal with economic problems that piled up following former prime minister Yingluck Shinawatra dissolving the house on Dec 9.
The Bank of Thailand recently said economic growth of 2.5% for the country was possible as targeted by the junta with additional public stimulus measures, creating a positive pass-through effect on private sector investments, as well as a faster than expected recovery of the global economy. However, the central bank still slashed its GDP forecast to 1.5% from 2.7%.
The SME sentiment index reached a low ebb of 36.6 points in the second quarter, and political factors remained the key concern of SME business operators, followed by economic issues, cost management, and labour.
SMEs operators are worried about economic conditions, as witnessed by the increase in the economic concern index to 38 points in June from 22.8 the preceding month. Liquidity and cash flow are the key concerns during the nascent economic recovery, he said.
TMB Analytics kept its 2014 economic growth projection unchanged at 2%. It predicts strong economic growth of 4.2% in the second half, driven by the NCPO’s economic plan, despite flat growth estimations for the first half.
Thailand's economy from January to March contracted 0.6% year-on-year and 2.1% quarter-on-quarter. The second quarter's official economic growth numbers are scheduled to be released by the National Economic and Social Development Board next month.
Mr Benjarong forecasts the central bank will maintain its policy rate at 2% throughout this year based on subdued inflationary pressure. However, interest rates are expected to hike next year as the country’s economic recovery picks up speed and global interest rates start to increase.
The research house forecasts Thailand’s GDP growth at 4% next year, while the policy rate is expected to nudge up by 50 to 75 basis points.