Thai Economy Slows Due to Capital Misallocation and SME Barriers

Thansettakij•Economy•3d ago

Reader Briefing

A study by the PIER institute reveals that the Thai economy suffers from capital misallocation where resources are flowing into inefficient businesses.

•The Puey Ungphakorn Institute for Economic Research (PIER) analyzed corporate financial data from 1999–2024.
•The study found a decline in asset turnover across almost all business sectors, including manufacturing, traditional services, modern services, and real estate.
•Capital misallocation is increasing, with assets concentrating in businesses that generate lower income per unit of asset compared to 2013.

Overview

•The Puey Ungphakorn Institute for Economic Research (PIER) studied capital allocation in Thai businesses using Department of Business Development (DBD) data from 1999–2024 and Bank of Thailand loan data.
•The decline in Return on Assets (ROA) in the Thai business sector is primarily caused by a decrease in asset turnover rather than a decline in profit margins.
•A comparison between 2013 and 2024 shows a shift where assets are increasingly concentrated in businesses with lower income-generating efficiency per asset.
•Financial mechanisms may contribute to the persistence of the problem because loan allocations are not aligned with the efficiency levels of the businesses.
•Small and Medium Enterprises (SMEs) face constraints regarding credit access and financial costs.
•The Thai economy is experiencing a systemic issue where resources are flowing toward businesses that use assets less efficiently.

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Key Entities

Organization

Puey Ungphakorn Institute for Economic Research(สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์)

The institute that conducted the study on capital allocation in the Thai business sector.

Department of Business Development(กรมพัฒนาธุรกิจการค้า)

The government agency providing corporate financial data used in the PIER study.

Bank of Thailand(ธนาคารแห่งประเทศไทย)ℹ️

The institution to which financial institutions report contract-level loan data.

PIER

Abbreviation for the Puey Ungphakorn Institute for Economic Research.

DBD

Abbreviation for the Department of Business Development.