Economic Intelligence Centre (EIC), a research house under Siam Commercial Bank reports business closures spiked almost 40% from last year. Business closures hit 38.4% year-on-year from June to July.
The EIC also anticipates higher figures in the second half due to the economic downturn amid the pandemic crisis.
For the first 18 days of August, the ratio of business closures increased by 37.9% year-on-year, according to the Economic Intelligence Centre (EIC), a research house under Siam Commercial Bank.
Total business closures tallied 13,400 year-to-date as of Aug 18, 2020.
On average, business closures grew 38% for 2.5 months and the ratio is expected to inch up in the second half of the year, said Yunyong Thaicharoen first executive vice-president of EIC.
Hotel and tourism businesses hit hardest
Heavily affected sectors announcing closures were mainly hotels and tourism-related businesses, textiles and automotive businesses, said Mr Yunyong.
Business closure announcements lag behind in an economic downturn, so they should continue to progress in line with this year’s negative economic outlook, he said.
“We cannot predict the rate [of business closures] later this year because it requires analysis with updated data, but the rate is expected to be a double-digit increase,” said Mr Yunyong. Business closures also lead to a higher unemployment rate.
In the second quarter, Thailand’s unemployed workers totaled 745,000, a near double-digit increase compared with last year’s corresponding period. The country’s unemployment rate increased to 1.95% in the April-June quarter, a record high since the first quarter of 2009, according to the EIC.
The services sector, hotels and restaurants saw the most unemployment as they have been reeling from the outbreak, particularly businesses relying on external demand and foreign tourists.
Hotels and restaurants show highest unemployment rate
The number of unemployed individuals in the hospitality and restaurant businesses were around 84,000 in the second quarter. While other services businesses were at 91,000. At the same time, hotels and restaurants showed the highest unemployment rate at 2.9%. Followed by 2.8% for construction and electronics at 2%.
Mr Yunyong said the unemployed individuals aged 15-24 are largely comprised of graduates.
This is the key risk segment, which shows an unemployment of 324,000 people. Equivalent to 98.2% of total unemployment in the second quarter, up from 209,000 logged in the first quarter, he said. The youth unemployment rate in the second quarter was 8.6%.
Underemployment also increased, resulting from fewer hours for both full-time and overtime workers. Work hours per week declined to 38.1 hours on average in the second quarter. Down from 40.7 hours in the first quarter and 42.7 hours at year-end 2019.
“The pandemic is scarring the economy, especially with the business closures and unemployment. With a vulnerable labour market, underemployed and furloughed workers could reach 3-5 million in the coming period,” Mr Yunyong said.
Higher household debt in Thailand is another symptom of the stalled recovery. Thailand’s household debt-to-GDP ratio could rise to 88-89% at year-end from 80.1% in the first quarter, said the EIC.
The EIC downgraded its prediction for GDP contraction this year to 7.8% from a 7.3% decline. – Bangkok Post