Bank of Thailand reports zombie businesses surging to nearly 6%, focuses on helping viable SMEs
Macro
Bank of Thailand Governor Vitai Ratanakorn disclosed that the share of businesses classed as zombie businesses, whose operating profits are insufficient to cover loan interest, rose from 2.7% in 2013 to 5.7% in 2024, or nearly 6%. This has intensified a K-shaped recovery, with large businesses recovering well while SMEs and small operators adapt more slowly. Overall SME credit has been negative for 16 consecutive quarters, in contrast to large operators, whose credit has returned to positive territory over the past 2 to 3 quarters. The top-performing 30% of SMEs can access only 21% of credit, compared with 60% for the top-performing 30% of large businesses. The Bank of Thailand governor said it must be accepted that the central bank and the financial system cannot help every SME, especially zombie companies that lack potential, fail to adapt, or cannot compete, and these must be left to market mechanisms. The focus should instead be on SMEs that are profitable and still have growth potential, as well as those ready to adapt. SMEs number 3.28 million businesses, employ 13.6 million people, or about 69% of total employment, and generate 1.73 trillion baht in economic value, or roughly 35% of GDP. However, their contribution to GDP growth has fallen from about 1.9% during 2012 to 2019 to 1% during 2023 to 2025. A zombie business is defined as one with an interest coverage ratio below 1 for three consecutive years, based on financial statement data from the Department of Business Development, Ministry of Commerce.
