Krungthai COMPASS research center projects Thailand's economy to grow by 1.8% in 2026, slower than its ASEAN-6 neighbors. Amidst multifaceted challenges, SMEs need to undergo a restructuring, adapting their business models, targeting niche markets, and leveraging added value to revitalize the pillars of the Thai economy under the 'Reinvent Thailand' approach.

Dr. Pacharapoj Nantaramas, Senior Vice President and Chief Economist of Krungthai Bank, revealed that Krungthai COMPASS forecasts Thailand's economy to expand by 1.8% in 2026, a slowdown from the previous year. This would be the first time in 30 years that GDP growth has been below 2.0%, excluding periods of crisis. Thailand's export sector is likely to contract due to geopolitical risks, while tourism is recovering slowly due to the loss of the Asian tourist market.

In a situation where the Thai economy is projected to slow down and faces challenges from existing structural vulnerabilities and a lack of competitiveness in the new global landscape, SMEs need to adapt their business models. The challenges for the government sector currently involve the Reinvent Thailand project, which is creating new dynamics to address structural problems in the Thai economy. One crucial solution is supporting SMEs in six priority sectors: agriculture and food processing, automotive, medical and health, smart electronics, tourism, and retail and wholesale. These sectors offer opportunities to enhance their potential, develop into new S-curve industries, and distribute positive impacts widely across the Thai economy.

A Krungthai COMPASS survey of 160,232 SMEs across the six priority sectors under the Reinvent Thailand project, using 15 years of historical data, found that SMEs are facing stagnation, reflected in declining return on assets (ROAs) between 2010 and 2024, and struggle to move up the business ladder. This indicates "erosion of competitiveness." Comparing the financial status of "high-performing businesses" and "businesses needing turnaround," the decline of SMEs is not due to a lack of effort. However, businesses are trapped in a ‘debt cycle,’ where even with price competition and cost management efforts, revenue often falls short of expenses. This leads to liquidity problems and accumulated debt, resulting in debt-to-equity ratios 3-5 times higher than those of higher-performing businesses. A major weakness of SMEs is their lower gross margin, by approximately 4-10%, reflecting high sales volume but low profit margins—insufficient for sustainable profitability.

Therefore, liquidity support and debt restructuring measures are “necessary” but “insufficient.” SMEs need a “major overhaul” by adjusting their business models to focus on value creation or niche markets. This requires investment to enhance capabilities, increase revenue, and achieve sustainable profits, while adapting to the new global context. Currently, SMEs can benefit from various measures under Reinvent Thailand, such as the SMEs Credit Boost program and low-interest loan (soft loan) programs designed to support investment. Furthermore, collaboration from other sectors is also crucial. Combined with the full leveraging of technology and data, such as the "big brother helping little brother" concept where large companies assist SMEs in the supply chain to access the PromptBiz system, which further develops into supply chain financing, this increases SMEs' access to liquidity and capital. Therefore, major restructuring is not an option, but a necessity for survival. This will help businesses overcome debt traps, return to sustainable growth and profitability.

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