BACK What Risk Factors Should Investors Pay Attention to During Economic Slowdowns?
If one visits markets, shopping malls, or leading commercial areas across the country, one will likely hear complaints from many vendors about the current state of the economy. They often express frustration, stating that business is slow, with more people browsing than actually buying, and that rising prices are discouraging consumers. This is a result of the ongoing economic slowdown, where growth is so minimal that it is almost stagnant. Income levels for both the general public and business owners have remained unchanged, while the costs of goods and services continue to rise. The mismatch between income and expenses has forced many families to cut back on unnecessary spending. To make matters worse, no one can predict when the economy will recover, leading many to stay cautious about potential risks that could impact investments, both large and small.
Key Risk Factors Investors Should Watch
1. Economic and Political Changes, Both Domestic and International
Political uncertainty, especially regarding unclear economic policies and investment promotion strategies, has led to a lack of confidence among investors. The ongoing inability to form a stable government has further aggravated this issue. Additionally, global political factors are contributing to the situation, particularly the escalating trade tensions between the United States and China. Recently, China's Ministry of Commerce announced a ban on the export of gallium and germanium, effective August 1, 2023. This move is seen as a retaliatory measure against the U.S. , which is considering new regulations on the export of chips to China. These chips are critical in the production of electric vehicles (EVs), communication devices, televisions, solar panels, and mobile phones.
2. Risks from Rising Interest Rates
This risk arises from interest rate hikes implemented by the central banks of the U.S., Europe, and Thailand. Further increases are expected as part of effort to curb the persistently high inflation rates. These rate hikes result in higher operational and investment costs, which can directly affect businesses and investors.
3. El Niño Crisis or Drought Conditions
The El Niño crisis or drought has significantly impacted Thailand, particularly the agricultural sector. Irregular rainfall has led to crop and the spread of pests and insects. The livestock industry has also suffered due to increased temperatures, which stress animals such as laying hens, resulting in reduced egg production. In farms lacking proper cooling systems, pigs have experienced heat-related deaths, leading to disease outbreaks among livestock. These challenges have also affected various manufacturing sectors, including food production and industries reliant on agricultural products or water-intensive processes. As a result, selecting the right industrial estate for factory construction or renting pre-built factories is becoming increasingly crucial for businesses or manufacturing industries considering investment.
Currently, the 304 Industrial Park offers land for industrial development, including plots for factory construction and pre-built factories for rent. These projects are located in two eastern provinces, Prachinburi and Chachoengsao, with over 20,000 rai of land available, including both developed and under-development areas.
Strategies to Mitigate Investment Risks
- Evaluate Emergency Reserves
In a slowing economy, having long-term emergency reserves is a significant advantage. Since the end of the current economic downturn is unpredictable, having at least 12 months’ worth of emergency funds for a business is essential to ensure survival during a recession.
- Seek Low-Interest, Fixed-Rate Loans
Those who lived through the 1997 Asian financial crisis, or the "TomYam Tom Yum Kung" crisis, are well aware of how floating interest rates can severely impact businesses. While borrowing should be a last resort for investors, it’s crucial to choose loans with the lowest interest rates possible—especially those with fixed rates—to avoid the volatility of fluctuating interest rates.
- Find Locations That Help Reduce Production Costs
Today, building factories comes with significant costs. Therefore, it is advisable to seek locations that reduce production expenses, provide easy access to labor, and are close to suppliers and customers. For instance, the 304 Industrial Park (IP304) offers a prime location. It has stable, high-density soil suitable for factory construction, , reducing building costs by up to 20%. It is also close to raw materials and has a labor pool offering competitive wages, which can help lower initial business expenses.
Currently, the 304 Industrial Park offers land for industrial development, including plots for factory construction and pre-built factories for rent. These projects are located in two eastern provinces, Prachinburi and Chachoengsao, with over 20,000 rai of land available, including both developed and under-development areas.
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