16 December 2020

The Impact of COVID-19 on Zombie Firms and Implications for the Thai Corporate Sector

The share of firms with prolonged debt-serving limitations due to low profitability, or so-called “zombie firms”


Kampon Adireksombat, PhD, Wachirawat Banchuen, Panundorn Aruneeniramarn, Paphon Kiatsakuldecha, PhD


The share of firms with prolonged debt-serving limitations due to low profitability, or so-called “zombie firms”, has continued to increase over the past 10 years, posing concerns for productivity and investment within Thai corporate sector. In 2019, just before the COVID-19 pandemic, the share of zombie firms among Thai businesses has already reached the same level prior to the Great Financial Crisis (GFC) in 2007. To provide better understanding of zombie firm issues, EIC analysis of zombie firms in Thailand has found the followings :


  1. Zombie firms have significantly lower levels of productivity, profitability, and investment than their non-zombie counterparts. The existence of these firms tends to cause resource misallocation and is concerning for the overall productivity of Thai business sector.

  2. Once a firm becomes a zombie firm, it is hard to reverse. Cured zombie firms are more likely to become zombie firms again. These firms generally remain in zombie status rather than close down and hence become chronic problems for the overall economy. Generally, zombie firms tend to concentrate among smallest and largest businesses as well as among
    long-established businesses.

  3. Based on debt-servicing ability forecast under declined sales, EIC expects shares of zombie firms to rise significantly during 2020F-2022F after the COVID-19 crisis. The impacts tend to most severe among tourism-related businesses as well as among already-fragile small businesses.

  4. The projected rise in zombie firms after the current crisis would differ from the global financial crisis (2007-2009), in which the share of zombie firms fell rapidly due primarily to a decrease in the policy interest rate, the condition of the Thai baht, the severity of the economic crisis, the unemployment rate, and the fragility of small firms.

  5. Short-term policy supports such as debt-restructuring are necessary to curb out scarring effects. Looking forward, policy measures should focus on grouping recipients whereas non-competitive firms should be assisted with orderly exits while viable firms should receive competitiveness enhancement for post COVID-19 crisis business environment.


We use cookies and other similar technologies on our website to enhance your browsing experience. For more information, please visit our Cookies Notice.