The Economic Intelligence Center of Siam Commercial Bank, or SCB EIC, reports that nearly 12% of companies currently operating in Thailand are at risk of being zombie companies. A zombie company is defined as one whose profits are insufficient to cover loan interest for two consecutive accounting periods and which has been in operation for more than three years. Broken down by industry, residential real estate, hotels and accommodation, and restaurants and beverages have the highest share of zombie companies. Zombie companies in the SME sector account for nearly three times the share of large businesses. The risk in the real estate and hotel sectors stems from heavy capital expenditure, large debt burdens and high fixed costs, while revenue depends on economic conditions, purchasing power and the tourism sector. Vitai Ratanakorn, Governor of the Bank of Thailand, said the truly hopeless zombie companies are those lacking potential, unable to adapt, or unable to compete. They must accept reality and be allowed to follow market mechanisms, because the Bank of Thailand and the financial system cannot use measures to rescue all SMEs. Meanwhile, SME business loans have contracted for 16 consecutive quarters, reflecting the weakness of businesses that has led financial institutions to tighten their lending.
SCB X Public Company LimitedSCB EIC reports nearly 12% of Thai firms are zombie companies and SME loans have contracted 16 straight quarters, signaling rising credit risk and weak lending for Siam Commercial Bank.
