81% of CEOs surveyed were affected by currency appreciation
Krungthep Turakij, in collaboration with Dhurakij Pundit University Research Center (DPURC), released their latest results of CEO sentiment index for May-June period. About 81.6% of CEOs surveyed indicated that their businesses had been affected by appreciation of the Baht; long-term prospect of the economy remained unclear; rising cost continued to put pressure on liquidity.
The May-June CEO sentiment index was conducted from 29th April to 12th May. Total of 409 CEOs participated in this round of the survey. The survey asked about their companies’ performances as well as their expectations on overall business and economic situations.
When asked about the impact of the currency appreciation on their businesses, 81.6% said the appreciation affected their business; 18.4% did not feel any impact. Among those affected, 15.4% said the impacts were more than anticipated; 43.5% about the same as anticipated; 22.7% less than anticipated; In order to cope with the impacts from currency appreciation, 42.3% looked for new oversea markets; 41.1% put more effort on domestic market; 35.4% attempted to reduce either production costs or overall costs of doing business; 32.7% reduction in long-term investment; 25.7% outsourcing; 24.6% trimming down their business processes; 22.2% more effort on marketing initiatives; 14.8% other measures such as down-sizing, substituting machines for labours, etc.
Currency appreciation and cost were major concerns
Respondents were asked to rate, on a scale of 1 to 5, about the importance of several factors that could potentially affect their businesses.
The top five were cost of production (3.8 points), currency appreciation (3.5 points), higher wage costs (3.4 points), overall economic condition (3.4 points) and decreased demand (3.3 points).
Index of overall economy showed lack of positive prospects
There was a slight improvement of overall economic index, from 2 points in April to 4 points in May; the index is, however, expected to fall to 3 points in June. It should be noted that the May-June index is well below the first quarter of this year, signifying lack of confidence of the respondents on long-term economic prospect.
Liquidity index continued to fall
Four business performance indices- revenue, cost, employment and liquidity- continued to suggest that doing business in the second quarter of this year will be a challenge. Slight improvements of revenue index from 4 points in April to 6 and 9 points in May and June (expected), respectively, imply that revenue growths are attributable to business-level adjustment rather than overall economic improvement. Positive, and rising, cost index rise to 46 points in May and expected to fall to 43 in June, suggesting that rising costs remained an issue for this period. Rising cost and slow growth of revenue jointly affect liquidity. As a result, liquidity index remained negative- 2 points. Slower employment growth is captured by employment index, which is 4 points in May and 6 points in June.
In sum, this round of CEO sentiment index asserts that the respondents considered currency appreciation as a long-term problem. They had begun to implement several initiatives in order to cope with this challenge. Liquidity problem induced by rising cost and slow revenue growth may have adverse consequence on long-run growth of business as well as the Thai economy as a whole.