BANGKOK — More than a year after Thailand’s military-staged coup, the country’s retail industry is only now beginning to show signs of a rebound. Retailers are banking on the tourism sector to lead the way as mounting household debt is keeping local shoppers away from the city’s ever-expanding malls.

But a bombing in central Bangkok last month could put a damper on the country’s tourism sector, which was expected to exceed 28.8 million foreign visitors in 2015.

Tourism, which makes up about 10 percent of Thailand’s gross domestic product, has traditionally been the one bright spot in the economy, which is making a slow recovery since political protests were staged on the streets of Bangkok in late 2013. The agricultural sector — which comprises roughly 8 percent of  gross domestic product — has decreased markedly as Thailand this year experienced its worst drought in more than a decade. Exports have weakened as well due to the slowdown in China, its biggest trading partner, with the Finance Ministry expecting exports to shrink by 4 percent this year.

In July, the ministry cut its GDP forecast for the third time this year to 3 percent — a sharp drop from the initial 5 percent the government anticipated right after the military took power.

“In 2013 to 2014, because of the political issues, the moods of shoppers dropped as [consumers] did not feel confident,” said Chatrchai Tuongratanaphan, executive director of the Thai Retailers Association, whose members make up roughly a third of the country’s retail consumption.

According to a monthly survey from the University of the Thai Chamber of Commerce, the consumer confidence index — which measures the country’s outlook on economic conditions, job prospects and incomes — has slid steadily since last December, and was at 73.4 in July. Anything above 100 indicates an improving outlook, while below 100 shows a deteriorating consumer sentiment. At its lowest point, consumer confidence fell to 67.8 in April last year, at the height of political protests leading up to the military’s ousting of the Yingluck Shinawatra-led government.

Krystal Tan, Asia economist for Capital Economics, believes that a slowdown in domestic demand has been a long time coming due to Thailand’s rapid credit growth.

Soaring steadily from about 54 percent of GDP in 2007, the Thai Finance Ministry puts current levels of household debt at about 85 percent of GDP, making it one of the highest in the region.

“Thai consumers have a high burden, so that’s one of the reasons why we expect private consumption to slow, so it doesn’t look too well in the upcoming years,” Tan said, adding that Thailand’s household debt levels are high “by historic standards.”

Yet mall developers are ambitiously hurtling ahead.

Mall Group — one of Thailand’s largest mall operators — recently opened a new “district” in Bangkok’s bustling Sukhumvit business area, and has plans to complete three major shopping destinations over the next three years. Its main rival, Central Group, is slated to launch two mall projects in Bangkok before the end of this year, and start three more in cities easily accessible from the country’s borders in anticipation of the Asean Economic Community (AEC) integration, when visa restrictions are eased and visitors from neighboring Southeast Asian countries are expected to be able to move more freely across borders.

According to Thai Retailers Association executive director Tuongratanaphan, tourists make up about 30 percent of revenues for his association’s retailers.

For 2015, Kriengsak Tantiphipop, a Mall Group chief executive officer in charge of EM District — among the newest entrants into Bangkok’s galaxy of luxury malls — said in an interview before the August 17 bombing that his company is expecting about 5 percent growth to roughly $1.5 billion.

EM District, which consists of a revamped Emporium mall across the street from newcomer EmQuartier mall, cost the company $15 million to launch, an amount that Tantiphipop himself admitted was “crazy” given the slowing economy.

Despite this, he said that Mall Group is optimistic about its future plans, which includes a third addition to EM District, a shopping resort in popular tourist destination Phuket, and a massive luxury mall near the city’s international airport — all of which is expected to be completed by the end of 2018.

“In the future, the tourists numbers will grow. After AEC is opened…they will easily flood into Thailand,” he said. “Compared to other countries, we still have a very reasonable cost for tourists to have a good time here.”

More significantly, the Tourism Authority of Thailand (TAT) is seeing an unprecedented surge in the number of Chinese visitors. Some four million Chinese came to Thailand during the first six months, more than double the amount of Chinese visitors last year. They are big spenders as well, with the TAT recording an expenditure of over $5 billion during that period. Whether those numbers continue given the economic turmoil in China — and the slowing economy — remains to be seen.

Yuwadee Chirathivat, department store ceo of Central Group, agreed that tourism is one of the key drivers of their sales, as the majority of their customers in middle- to lower-income groups are affected by “decreasing income, higher household debts and rising unemployment rate.”

Central Group’s retail operations managed to grow by about 6 percent to $2.5 billion within the first half of 2015, compared to the same period in 2014.

“Domestic consumption is likely to remain low but the number of international visitors is expected to pick up while lower fuel prices should help boost purchasing power to a certain extent,” she said.

Then there is the impact on tourism of the bombing tragedy. Both Mall Group and Central Group declined to comment on whether it might affect their growth projections. The bomb blast, which occurred at the famed Erawan Shrine on the night of August 17 — steps from Central Group’s CentralWorld and Mall Group’s Siam Paragon — left at least 20 people dead and more than 120 injured. In a widely criticized investigation, Thai authorities have arrested two men over the attack, though the motive is still unclear. General Prayuth Chan-ocha, who is also Thailand’s prime minister, said on the night of the bombing that the attacker had meant to “destroy our economy, our tourism.”

The immediate impact of the bombing has been palpable, however. According to statistics provided by the Department of Tourism, the week leading up to August 17 saw tourist arrivals average more than 93,000 a day; the week after saw that amount drop to roughly 87,000 arrivals a day.

Wolfgang Arlt, director of the China Outbound Tourism Research Institute, explained that Chinese travelers are very reactive to any potential threats to personal security, and pointed to South Korea’s recent outbreak of MERS as an example, which prompted potential visitors to reroute their holiday plans to Thailand and Japan instead.

“[In the] short-term, Chinese tourists are very [sensitive] to a lack of security, especially in cases like Thailand, which is mostly a leisure destination, which can be easily substituted,” he said.

Hotel groups in Bangkok have been affected as well, though a representative for the Minor Hotel Group — which owns the luxury Anantara hotels and resorts throughout Thailand — said that they expect “tourism will rebound quickly.”

Sarah Fowler, senior analyst at Oxford Economics, agreed, explaining that Thailand’s tourism sector has historically remained resilient in the long-term despite being affected in the immediate aftermath of violent political protests. She predicted that things would be back to normal by the end of the year.

“In the last 10 years, we’ve seen Thailand in a cyclical environment where there has been periods of thousands of people on the streets protesting, and for a few months, tourism has dropped sharply. In that kind of situation, the malls would be affected,” she said. “But what we’ve seen is that this is a cyclical thing that Thai tourism does seem to be able to rebound from.”

However, she said, any recovery of the retail and tourism sectors is predicated on the political situation, which is keenly felt in every corner of the economy.

“We are not sure they will be on track to hold democratic elections by next summer,” Fowler said. “The political uncertainty is quite a big cloud hanging over everything, and it is a big concern for the locals.”

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