Bangkok--19 Mar--Krungthep Turakij
Half of the CEOs surveyed believed that the Thai economy in the second quarter will perform at about the same level as the first quarter; 68.4% said they might be forced to raise their prices if energy costs rise.
Krungthep Turakij in collaboration with Dhurakij Pundit University Research Center (DPURC) conducted a survey of 402 CEOs on economic and business outlook; the survey also asked about potential effects of higher energy price on cost of doing business as well as how they plan to cope with such effects. The survey was conducted from 25h February to 8th March 2013.
On economic outlook of the second quarter of 2013, 21.4% believed that the economy would perform better than the first quarter; 51.0% about the same; and 27.6% perform poorer.
Sentiment index of Thai economy in February is 22 points and declines subsequently to 13 and 5 points in March and April (forecasted). While positive value of the index represents favorable sentiment, its declining trend reflects CEOs’ concerns about the economy. Such concerns were driven largely by four factors: 1) rising cost induced by higher national minimum wage; 2) potential increase in energy cost; 3) higher cost of raw material; and 4) appreciation of the Baht.
Four business performance sentiment indices- revenue, cost, employment and liquidity- indicate that doing business in the second quarter of this year will be a challenge. Relatively flat revenue index implies that revenue will grow at a slow rate. Positive, and rising, cost index signals that CEOs expect their costs to be higher in March and April. Rising costs and slow growth of revenues result in a fall in liquidity index. Such pessimistic outlook also influences employment decision. With positive but falling employment index, slow growth in employment is to be expected.
On the factor that would influence business performances in the first quarter, the top five are i) wage cost, ii) energy cost, iii) costs of raw materials, iv) domestic economic condition v) Baht appreciation and domestic political condition.
When asked which of the energy costs has the most impact on business, 35.3% said electricity; 28.2% diesel; 14.5% NGV; 11.3% LPG; and 10.7% Benzine.
On measures used to cope with the impacts from higher energy costs, 68.4% said price increases; 55.0% reduction on non-energy costs; 47.1% better maintenance of machineries and equipment; 30.7% reduction in long-term investment; 25.9% using a more energy-efficient machinery and equipment; 24.6 reduction in overall business process; 22.8% more efficient logistical arrangements; and 10.3% use alternative energy sources.
The results from this round of survey clearly highlight the CEOs’ concerns about higher cost, especially the ones induced by wages and energy prices. The severity of the drought can be another aggravating inflationary factor. If that happens, we might see a decline in household spending as well as another round of cost increase. With no significant improvement in overall economic condition in sight, the second quarter will be quite a challenge