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The impacts of increases to the price of sugar on supply chains and the wider economy

Global: Efforts to avoid domino effect

Through 2019, the housing market in the Bangkok Metropolitan Region (BMR) is expected to keep growth flat or slow down due to a high base effect in 2018. The market will also encounter headwinds in the form of: (i) the new, stricter regulations governing housing debt that determine loan limits on a loan-to-value ratio; (ii) the introduction of the Land and Building Tax Act, which will come into effect in 2020; and (iii) a weakening of the spending power of overseas (and especially Chinese) buyers caused by a softening of the world economy. These factors may then feed into higher operating costs, and a decline in both investor confidence and the willingness of buyers to purchase new properties. However, in 2020 and 2021, the market is expected to rebound on the effects of government spending on major infrastructure projects and on greater demand for accommodation from non-Thai buyers investing or working in Thailand.

Over 2023 to 2025, strengthening economic conditions both at home and in export markets will help improve the outlook for the Thai sugar industry, especially in 2024 and 2025. Consumption will be lifted by the recovery in the tourism sector, which will add to demand from downstream industries like food and beverage manufacturers. On the other side, output will benefit from improved sugarcane outputs, thanks to the favorable climatic conditions and the positive effect of price guarantees on the total area of sugarcane under cultivation.

The palm oil industry has benefited from improving conditions through 2023. Supply has expanded on more favorable weather, especially in the South, the incentive effect of elevated prices on growers’ efforts to maximize production, and better timing of the harvest, which has then resulted in palm fruits having a higher oil content, and as a result overall yields have risen. Sales have also benefited from stronger domestic demand

Krungsri Research projects conditions for the Thai sugar industry would improve in 2021-2023 along with the recovery of the overall economy, stronger demand from downstream industrial consumers, especially the food and beverage industry. There are also expectations of better climate, which would boost sugarcane output and sugar production. However, the industry is facing several challenges, including high sugar inventory worldwide and the effect on global sugar prices, imposition of sugar tax in many countries, rising awareness of personal health globally, and lingering uncertainty over government regulations for the industry, especially the reform of the Sugarcane & Sugar Act and its potential impact on operators’ margins and earnings.

Growth in the value of the domestic market for pharmaceuticals is forecast to slip to just 2.5% in 2021. This is largely due to Thailand’s 3rd wave of Covid-19, which has caused a drop off in hospital visits for those seeking treatment for less serious conditions. However, over 2022 and 2023, annual growth in the market should accelerate to 3.5% on: (i) a rising concern among Thais over personal health and wellness, itself partly a side-effect of the Covid-19 pandemic; (ii) the aging of Thai society, which is driving an increase in the number of individuals needing treatment for chronic non-communicable diseases; (iii) the broad coverage provided by the Universal Health Coverage scheme; and (iv) the return of foreign patients to Thai hospitals.

Depressed conditions have extended from 2020 into 2021 for the office rentals business, and the industry is continuing to battle against the stiff headwinds generated by this year’s severe outbreak of Covid-19 and the impacts of this on the economy. The pressure on costs that this has generated has then forced businesses to trim back on expenses, lay off staff and reduce their office sizes, but in 2022 and 2023, demand is forecast to make its way slowly out of this trough as the effects of the vaccine rollout begin to be felt, the economy rebounds, and the government moves forward with infrastructure projects, especially those connected with communications. The net effect of this will be to spur developers to step up their investments in new office space and/or in renovations of older buildings both within the CBD and in less central parts of the BMR. However, major developers’ investment plans indicate that over the period 2021-2023, growth in supply is likely to outpace what will be only somewhat weak recovery in demand, and so over the next 3 years, the occupancy rate will trend downwards.

UKRAINE CRISIS IMPACTS ON 2022 INDUSTRY OUTLOOK

IMF cuts global growth forecast amid mounting geopolitical and trade risks, while inflation continues to weigh on Thailand’s economy