Op-Ed | Fasten your seatbelts for a bumpy 2019

Thai Prime Minister Prayuth Chan-ocha gestures the Thai way shortly after accepting the ASEAN Summit and Related Summits' hosting and chairmanship for next year in Thailand from Singaporean Prime Minister Lee Hsien Loong Thursday, Nov. 15, 2018, in Singapore. (AP Photo/Bullit Marquez)

BANGKOK (The Nation/ANN) – Thailand’s economy and workforce face greater turbulence in the new year as headwinds strengthen.

As we approach the end of 2018, this is a good time for a reality check on Thailand’s economic outlook for the year ahead. In 2019, economic challenges are likely to increase in severity compared to this year due to both domestic and international factors.

Specifically, the Thai tourism sector is facing the reality that growth in Chinese arrivals is cooling after a decade of phenomenal rises. With over 10 million Chinese visiting Thailand this year, the country has become our largest source of foreign tourists, accounting for over 30 percent of total arrivals.

At present, tourism accounts for more than 10 percent of Thailand’s gross domestic product, which is forecast to slow to a growth rate of 4 percent or less in 2019.

Meanwhile the export sector, the country’s largest growth driver, is also expected to slow, due to the US-China trade war and other unfavorable world economic factors.

While the after-effects of the Phuket ferry tragedy that killed dozens of Chinese tourists in July might have faded, hopes of a quick return to the good old days are unlikely to be realized since the Chinese economy itself faces a new reality of slowing growth amid the trade war with the US.

Hence, Thailand can expect fewer Chinese tourists and investors, including those looking to buy Thai condominium units and other property.

The Thai property sector is also witnessing the specter of an oversupply which is turning more worrisome. Besides the emerging glut from several mega-development projects – especially those combining residential, retail, hotel, and office space – household and personal debts have jumped among investors-cum-speculators who are over-leveraging their borrowing capacity in hope of lucrative returns in the property sector.

One banker reports that property speculation is rife among unscrupulous borrowers, who are securing multiple multimillion-baht loans to buy condo units beyond their payback capacity. For example, with a monthly salary of Bt50,000, you can get multiple loans for, say, four or five separate condo units whose developers are desperate for buyers.

Each unit may cost anywhere from Bt2 million to Bt5 million, boosting the individual borrower’s debts to over Bt10 million on a monthly income of Bt50,000. Investors can load up their borrowing in this way by applying for loans simultaneously so as to evade banks’ risk-assessment mechanisms.

In other words, the banks are falling short in safeguarding their credit risks as they compete for short-term earnings. And the risks are rising due to the Bank of Thailand’s latest interest rate hike, the first in seven years.

Neither is the outlook rosy for employees in the banking sector, as digital and other technologies are adopted rapidly, threatening the jobs of manual workers who are being displaced by automatic and mobile app banking services.

The insurance sector is another area feeling the disruptive force of technology, which has the potential to displace all insurance sale agents when new platforms become operational.

Data analytics, artificial intelligence, blockchain and the Internet of Things are advancing rapidly, with significant impacts on the economy, labor market, business competitiveness and government. Both positive and undesirable consequences will be obvious when the fifth-generation (5G) mobile network becomes operational in the next few years.