The Year of the Metal Rat is said to have promising prospects for stability, wealth and surplus, according to the Chinese zodiac. In actuality, 2020 comes with ominous signs suggesting another challenging year for businesses, as geopolitical tensions and poor sentiment among consumers and investors will not dissipate into thin air any time soon.
The languishing fiscal 2020 budget, the strong baht and elevated household debt are key setbacks restraining prosperity, from those sitting atop the social hierarchy to ordinary peasants dwelling in makeshift homes.
In the virtual sphere, technology will continue to be a double-edged sword for businesses, with those who fail to keep up facing greater difficulties and risking bankruptcy. Technological advancement will, however, bring forth positive changes, with consumers positioned to reap a windfall of benefits.
BANK OF THAILAND
Against the backdrop of still-subdued growth, trade tensions between the US and China, the high debt of households and small and medium-sized enterprises (SMEs), the baht's upward trend and monetary policy's limited space, the central bank's policy dilemma is deepening in the search for growth and financial stability.
The Bank of Thailand is expected to take a cautious approach to monetary policy deliberation in 2020 and implement more macro-prudential measures to curb risks related to private-sector debt.
Central bank governor Veerathai Santiprabhob said recently that there were constraints on the implementation of monetary and fiscal policy, as the prescription of harsh medicine could pose risks to financial stability, while structural factors have also impeded their economic transmission.
But the central bank reasserted that it stood ready to further ease monetary policy if the country's economic growth worsened.
At 2019's final meeting in December, the Monetary Policy Committee (MPC) dramatically slashed the forecast on economic growth for 2020 to 2.8% from 3.3% predicted in September, citing lingering external uncertainties.
If the prediction holds true, 2020 will be the second year in a row that the economy expands below growth potential after 4.1% growth in 2018.
The rate-setters also unanimously voted to keep the policy rate unchanged at a record-low 1.25% after cutting the rate by a quarter-point twice in 2019.
Economists are divided on monetary policy movements in 2020. Some predict one more rate cut, while others forecast the benchmark rate to be left steady throughout the year.
A joint statement of the MPC and the Financial Institutions Policy Committee in December said that the synchronised economic slowdown both at home and abroad, coupled with the prolonged low-interest-rate environment, would still provide a backdrop conducive to inculcating fragility in the financial system.
The committees will continue to monitor developments, assess the effectiveness of the implemented measures and explore further policy options to prevent a potential build-up of systemic risks in the future.
Indebtedness of households and SMEs remains worrisome, the committees said, noting that the high ratio of household debt to GDP is poised to rise further amid a subdued growth outlook.
In an environment where economic growth remains subdued and businesses continue to face structural changes, the committees stressed that the task of resolving household and SME debt would require integrated efforts from all parties. Both preventive and corrective measures would need to be employed, with priority given to restructuring troubled loans, they said.
INFRASTRUCTURE
With exports, which represent a big chunk of the economy, still in trouble due to global weak demand and the ongoing trade war, state investment in big-ticket infrastructure projects and the government's Eastern Economic Corridor (EEC) flagship appears to be one of the few lifelines that Thailand can bank on to maintain economic growth momentum in 2020.
The high-speed rail project linking Don Mueang, Suvarnabhumi and U-tapao airports is set to get off the ground in the year ahead. Patipat Janthong
Making state investment happen will also have a knock-on impact on private investment, which was weaker than expected in 2019 due to the prolonged struggle to establish a new government.
According to a National Economic and Social Development Council report, 17 key infrastructure projects worth 782 billion baht gained cabinet approval. Some are scheduled to be up and running in 2020 and 2021.
Six projects will go in to operation between 2020 and 2021, which will help contribute to economic growth in those years.
Six projects are scheduled to kick off in 2020. They are the Blue Line extension (Bang Sue-Tha Phra), the Green Line extension (Mo Chit-Saphan Mai-Khu Khot), the Pattaya-Map Ta Phut motorway, the double-track rail network linking Lop Buri-Pak Nampho, double-track rail linking Chachoengsao and Kaeng Khoi, and a goods distribution centre at Chiang Khong district in Chiang Rai.
Four projects will start construction in 2020. They are the Pink Line (Khae Rai-Min Buri), the Yellow Line (Lat Phrao-Samrong), the high-speed rail project linking Don Mueang, Suvarnabhumi and U-tapao airports and the third phase of Map Ta Phut seaport.
The 17 projects are part of the Transport Ministry's investment scheme worth a total of 1.94 trillion baht during 2015-22.
Of the 1.94 trillion baht, 259.7 billion baht will be drawn from the national budget, 1.2 trillion baht from loans, 338 billion baht in the form of public and private partnerships and 147.6 billion baht from government revenue and funds.
TOURISM
Thailand's tourism industry will have another challenging year in 2020, given how the global economic slowdown may impede international and domestic travel.
Based on the 2019-20 report from the Pacific Economic Cooperation Council, economic growth in the Asia-Pacific region is forecast at 3.3%, down from 3.8% in 2019, as a result of trade tensions between China and the US.
The report included survey results conducted by 627 experts in Asia-Pacific. Of the respondents, 70% said the global economy will continue to expand at a slow pace in 2020, with 64% of them identifying protectionism and trade war as major risks poised to stall growth over the next few years.
The continued trade spat, together with volatile foreign exchange, has put exports in the doldrums.
Tourism will play a greater role in driving the Thai economy in 2020, according to Phacharaphot Nuntramas, senior vice-president of Krungthai Compass, a research unit of Krungthai Bank.
Mr Phacharaphot said tourism is a more stable industry, attracting new investments every year despite incoming challenges, particularly the strong local currency.
Thailand's tourism is set to generate 3.18 trillion baht in 2020, up 4% year-on-year from 3.06 trillion baht. An estimated 40.8 million foreign tourists will visit Thailand in 2020, contributing some 2.02 trillion baht to the economy.
To keep pace with global travel trends, the Tourism Authority of Thailand has made "Responsible Tourism" the agency's flagship project in 2020, aiming to promote the growth of sustainable tourism instead of relying on mass attractions and enjoying a high number of arrivals regardless of the quality of tourists.
Small cities have been highlighted, and community-based travel will play a vital role in boosting the growth of Thai tourism in the future.
Thailand has not been alone in exploiting tourism to drive the economy forward: neighbouring countries have adopted the same tactics, sparking intense competition in recent years.
Vichit Prakobgosol, president of the Association of Thai Travel Agents, said several countries have targeted China, the biggest tourism market, prompting Thai authorities to provide waivers of visa-on-arrival fees to increase competitiveness.
Other visa policies, such as double-entry visa, are necessary to support cross-border tourism between bordering secondary provinces in Thailand and neighbouring countries, Mr Vichit said.
A five-year multiple-entry visa for businessmen should also be considered to attract foreign visitors, he said.
Mr Vichit expects Thai tourism to bounce back over the next few years when the expansions of Suvarnabhumi, Don Mueang and U-tapao airports are completed.
Policymakers are, however, advised to apply more solid and sustainable practices in order to mitigate the social and environmental impacts from increasing visitors, he said.
STOCK MARKET
While the IPO outlook might be somewhat rosier this year, with several IPO launches in the pipeline, sentiment in Thailand's stock market in 2019 was largely negative, with recurring volatility seen throughout the year.
In 2019, the Stock Exchange of Thailand (SET) index's year-to-date return was a paltry 1% and most newly listed firms saw their share prices tumbling below IPO prices, leaving investors wallowing in disappointment.
Several variables have contributed to lower share prices, such as demand and supply for investment, fundamentals of listed companies and IPOs priced higher than companies' fundamentals can account for.
As economic headwinds and business risks abound at home and abroad, the SET index will continue to face the daunting task of boosting index gains, together with mitigating financial volatility and digital disruption.
Kongkiat Opaswongkarn, chairman of Asset Plus Securities, said the Thai stock market will face several challenges in 2020, such as a lack of newly listed companies having a large corporate size and quality-certified businesses, tepid earnings recovery of large listed firms and a lack of tech firms on the bourse.
Listed companies operating in the financial sector are also expected to face difficulties ushered in by technology disruption, with the strong baht and low interest rates adding pains to business performance, Mr Kongkiat said.
In his view, investment allocation into foreign stock markets is recommended to generate better returns and reduce risk exposure of domestic stock fluctuation, since the operating results of SET-listed companies may not recover sufficiently.
For Principal Asset Management, the investment environment for 2020 is "risk velocity", whereby capital market conditions are poised to become more volatile, risks will accelerate at a higher pace and the drastic change in investment assets will be swift and ruthless.
"Fast-paced change will make investment strategy more difficult," said chief investment officer Win Phromphaet. "We suggest constructing an investment portfolio on diversification or based on investors' age."
Three suggested assets for asset allocation are bonds, local and foreign equities and real estate investment trust (REIT) units.
Investing in short-term bonds is recommended to avoid hefty losses, as returns on investment from bonds will be low in the depressed rate environment, Mr Win said.
For the SET index, the bourse has an opportunity to rebound depending on two main factors: the Sino-US trade dispute and government policies.
"Investors should have REITs and property funds in their portfolios," Mr Win said. "However, capital gains and returns are difficult to anticipate, except the normal dividend yield from rental and lease at 4-6%."
RETAIL
Thailand's 3.6-trillion-baht retail market is likely to be more lacklustre than expected in 2020, as negative factors remain bountiful, be they continuously stiff competition from e-commerce platforms, the global economic slowdown or the strong baht.
A man holds a smartphone to use augmented reality features in a supermarket.
Kasikorn Research Center forecasts Thailand's retail business this year to expand by 2.7-3% after anticipated 3.1% growth in 2019.
Sectors focusing on middle- to low-income earners, like traditional mom-and-pop stores and hypermarkets, could have difficulties, while the prospects for supermarkets and e-commerce operators remain positive.
The Thai Retailers Association has a pessimistic outlook, forecasting that Thailand's retail industry, which recorded growth lower than that of the country's GDP for the past two years, will see another challenging and difficult year in 2020.
With the growing popularity of online shopping, retail stores targeting medium-to-low income customers, such as hypermarkets, may experience a tough time to expand in 2020.
Big hypermarkets are also expected to see less-aggressive expansion because the retail format is no longer a good fit for customers, who prefer convenience and shopping at retail stores near their homes.
About 1,000 new small retail stores will open this year. From these, 300-400 stores will be in the form of mini supermarkets and over 700 will be convenience stores, health and beauty stores, home improvement and appliance stores, and sporting-goods chain stores.
Surachet Kongcheep, managing director of Phoenix Property Development and Consultancy, said Thailand's retail market is unlikely to recover in 2020 because of the overall economic slowdown and relatively low domestic demand.
As of October 2019, the existing retail space in Bangkok and the surrounding area was estimated at 8.406 million square metres. Total new retail added in Bangkok and the surrounding area from January to October totalled 160,000 sq m; about 100,000 sq m was expected to be in operation in the fourth quarter of 2019. For the whole of 2019, total supply was estimated at 260,000 sq m.
PROPERTY
The property market slowdown is expected to continue in 2020 as a myriad of negative factors carry over despite government-sponsored property incentives and heavy sales promotions by developers.
The government has cut transfer and mortgage fees to 0.01% until Dec 24, 2020 for residential units valued at 3 million baht or less.
Negative factors that have weakened purchasing power include Thailand's economic slowdown, high household debt, the new loan-to-value (LTV) limits and banks' stricter rules for mortgage lending.
People who have strong purchasing power and the ability to get mortgage loans are likely to remain reluctant to buy a house amid poor sentiment, even as they are offered many promotions and heavy discounts by residential developers.
To urge homebuyers and boost sentiment, the government in November cut transfer and mortgage fees to 0.01% from 2% and 1% respectively for residential units valued at 3 million baht or less until Dec 24, 2020.
A month later, the Baan Dee Mee Down scheme was launched, giving a cash rebate of 50,000 baht for homebuyers with a monthly income of no more than 100,000 baht or 1.2 million baht a year.
Many property developers and experts do not believe these packages can help stimulate the property market, as those receiving these stimuli are a limited segment.
They also said the cut of transfer and mortgage fees should be given to all unit prices, as most of those who want to buy a house priced at 3 million baht and lower have limited purchasing power.
The new LTV limits, which have drawn back investment buyers in the condo market since the second quarter of 2019 after becoming effective in April, will continue playing a key role in developers' business plans in 2020.
Like in 2019, residential developers in 2020 will continue shifting to low-rise houses (single-detached house, townhouse and duplex house) as they target real demand, which is rarely impacted by LTV limits.
Some developers suggested the LTV limits be revoked or postponed until the economy recovers. Or at the least, the LTV limits should be applied to those buying third houses onward, not second homes.
Financial institutions will keep using stricter rules in mortgage lending in 2020 amid the economic slowdown. Some banks have asked for additional financial documents, a new practice never practised before.
A slowdown in the property market in 2020 will hurt the condo segment the most, as there are many unsold, ready-to-transfer units carried over across the year. On the other hand, there will more new projects being completed with unsold inventory.
TELECOM/IT
No drastic change can be expected in the domestic telecom market in 2020: innovative tech needs time for adoption, while 4G service and enhanced mobile broadband will still be the mainstream options.
Visitors check out latest computers at Commart Work 2019 at Bitec on Dec 19.
Although the telecom regulator will hold 5G licence auctions in February to serve innovative tech in the country, business use cases may not come into play in the same time frame.
Vertical industries, targeted to be a major adopter of 5G tech, such as the Internet of Things (IoT) and robotics, may be hesitant about investing or pursuing new innovation due to an unpromising economic outlook, expected to grow only 2.8% in 2020.
In 2019, mobile operators were still engaged in the price competition, particularly for prepaid service with unlimited packages.
The segment saw stronger performance by operators, partly due to the dwindling number of promotion packages. The focus was on drawing new subscribers.
This contrasted with 2018, when the competition was fierce in both prepaid and postpaid systems, and various promotion packages were rolled out to keep existing customers and court new subscribers.
Telecom veterans said the whole picture of the telecom market will be seen clearer after the 5G licence auctions, particularly for the 2600-megahertz range, which is believed to be the most sought-after spectrum among operators.
In 2020, 5G tech is likely to serve as a marketing point for customers with the promise of enhanced mobile broadband. This year is also good timing for consumers to learn about the benefits of 5G tech before the real business use cases get off the ground.
Industrial players need to see clear benefits from 5G tech adoption before investing.
Meanwhile, IT hardware is expected to have advanced features in line with technological development in 2020.
There are 1.3 million computer units and 18 million smartphones in Thailand, underlining the maturity of the segment.
But the new advanced features are likely to shore up demand for computers and IT devices in 2020.
Computers and notebooks will come with advanced computing and higher graphics performance, as well as longer battery life.
Artificial intelligence will become part of various hardware components and software. Foldable display devices will gain more traction to enhance the customer experience.
Foldable display devices will mainly serve high-end users who need to engage in multitasking.
Computers will be more segmented to cater for specific user groups.
Gathering steam is the segment involving those creating digital content that requires high graphics performance.
Gaming machines, meanwhile, will become lighter and have a better battery life.
The rise of IoT will help facilitate edge computing, which could potentially offload the work handled by cloud computing.
Additionally, 5G-enabled smartphones are expected to hit Thailand in 2020 once 5G commercial service is rolled out. Internet speeds will be exponentially faster and bring new mobile applications with advanced features.
AUTOMOTIVE
This is poised to be an unfavourable year for the country's automotive sector, which is suffering from slow GDP growth, bearish exports and global economic headwinds.
The FTI forecasts car sales at 900,000 units in 2020. Krit Phromsakla Na Sakolnakorn
Starting with 2020 car sales, the local market looks set to continue declining further as monthly car sales have been dropping persistently since last June.
As expected, many car distributors also forecast that the 2019 car market will slightly drop to 1 million units sold after steep growth in 2017 and 2018.
The Federation of Thai Industries (FTI) projects car sales in 2020 at 900,000 units.
Surapong Paisitpatanapong, a spokesman for the FTI's automotive industry club, said the projected contraction is part of a cycle in the industry, not a crisis.
"The market moves in line with the country's economy and people's purchasing power," he said. "If the government can speed up budget disbursement and begin new infrastructure megaprojects, these will see the car market grow higher than Thailand's GDP."
Mr Surapong said the US-China trade tension is hurting local economic momentum and pulling down purchasing power.
When the economy is unfavourable, banks tighten auto loan approvals because they are concerned about swelling household debt, he said.
Mr Surapong said the market growth of 900,000 cars a year is healthy enough for the country's fundamentals, based on annual income of US$6,000-7,000 per person in Thailand.
For car shipments in 2020, the club projects export volume below 1 million cars if the trade tensions flare unabated.
With this projection, shipments will stay below 1 million cars for the first time in nine years. Thailand's car exports have stayed above 1 million units since 2012.
"The club hopes US President Donald Trump loses his re-election bid in November 2020," Mr Surapong said. "A new US president will likely end the trade war. The automotive industry has recorded a downturn in many countries since 2018, including the US, Japan and China, as a result of the trade war."
Combining exports and local sales for cars, the club expects production of 1.8-1.9 million units in 2020.
For 2019, car production is estimated at 2 million cars, down 7.7% from the previous year.
Last year's estimates for local car sales and exports are at 1 million cars each, representing a decline of 4% and 12.33% year-on-year, respectively.
ENERGY
Low prices of energy resources such as biofuels and petrochemicals in 2019 were seen as the perfect storm for Thailand's energy sector, as the contractions came with lowered gross refinery margin.
Continuous gains of the baht also obstructed the exchange costs of energy companies.
A technician inspects solar panels at a solar farm in Rayong province. PATTARAPONG CHATPATTARASILL
For 2020, the business trend of the energy sector will focus on renewable and clean energy, while traditional power generation is becoming saturated as fossil-based resources are depleted globally.
To survive amid these negative factors in 2020, many energy companies have diversified to other related businesses with massive budget allocation such as renewable power, cleaner oil refining, electric vehicles and energy storage systems, which are expected to disrupt in the whole energy sector.
Chaiwat Kovavisarach, president and chief executive of Bangchak Corporation Plc (BCP), said some risk will continue to prevail in 2020, pushing many companies to shift their business operations into other sectors.
The oversupply of refined oil and biofuels is expected to ease in 2020, and crude oil prices are anticipated to be unchanged from the previous year.
"BCP believes that the worst had ended, so every cloud has a silver lining," Mr Chaiwat said.
BCP's long-term plan is fixed on adding value to biofuels from the synthetic biology business to tap into the fast-growing industry. The objectives are to produce vegetarian meat from vegetables, biopharmaceuticals and biocosmetics.
Preeyanart Soontornwata, president of B.Grimm Power, said the country's power market is becoming saturated, so the company has to begin energy storage by teaming up with South Korean energy companies.
This new business will support the next stage of power generation from 2020 onward.
B.Grimm is preparing to be a shipper of liquefied natural gas (LNG).
"We are developing a power plant for LNG in Vietnam and expect to be the shipper under a licence granted by the Thai government," she said. "B.Grimm has seen fast growth of renewable power and this upward cycle is disrupting the power segment, so we will seek new opportunities both domestically and abroad."
Sarath Ratanavadi, chief executive of Gulf Energy Development, said the company is keen on new investment and asset acquisition in every power businesses: gas-fired power plants, renewable power projects and distributed power generation.
The next business is the energy storage system, he said.
"Amid economic uncertainties, Gulf plans to diversify in overseas territories," Mr Sarath said.
Gulf has also diversified into infrastructure projects by forming a joint venture with PTT to develop Map Ta Phut seaport.
The company also won operation and maintenance contracts for new motorways from Bang Pa-in to Nakhon Ratchasima and Bang Yai to Kanchanaburi.
