A survey by the University of the Thai Chamber of Commerce (UTCC) released yesterday shows that the industrial sector's revenue is projected to slump by 34 per cent in the second quarter this year, due to negative factors including rising oil prices, political instability and an economic downwards trend expected to trigger an unemployment problem.

The Foreign Trade Department also reported yesterday that imports of capital goods dropped by 9.2 per cent in the first quarter. This could indicate an extremely low appetite among manufacturers to increase their capacity, though Thailand's capacity utilisation is over 70 per cent - the level that requires new investment.

The situation would be hard for about 700,000 students who are expected to complete bachelor's degrees and vocational degrees and enter the labour market this year, the UTCC said. About 300,000 are completing bachelor's degrees and who are considered unskilled labour.

"Although the survey respondents say that the slowdown has not yet hurt the employment rate, it's clear that it will affect the falling employment rate in the future," said Yajai Chuwicha, head of the Chamber Business Poll at the university.

Based on 600 respondents, the survey conducted in April covered manufacturers in various industries. They say their operations have been hit by rising oil prices and the economic slowdown, which would affect sale orders and profits.

A drop in consumer purchasing, unclear government economic policies and lack of liquidity for financing also attributed to the slowing of business growth.

About 94 per cent of respondents said their employment rate would remain unchanged in the second quarter. Four per cent said they would decrease employment, while 2.3 per cent would increase employment.

Respondents from the industrial sector were most likely to decrease employment, at 7.2 per cent, compared to 1.6 per cent of the service sector and 3.2 per cent of the trading sector. The agricultural sector was the only sector that would not change its employment rate.

Thanawat Phonwichai, director of the university's economic and business forecasting centre, said the slowing growth of the industrial sector would cause problems for job seekers, particularly unskilled workers.

Moreover, some industries might decrease their head counts if their business condition deteriorates, he added.

According to the National Statistical Office, 34 million workers are now employed: 12 million in agriculture, six million in the industrial sector and the remainder in service and trading sectors. As of February, Thailand's unemployment rate was 1.5 per cent.

The UTCC expected the unemployment rate to rise this year, but it would not exceed 2 per cent of the workforce.

"If the rate goes up to 4 per cent, that will show a dangerous signal for business growth in the Kingdom," said Thanawat.

Some 95 per cent of respondents were also displeased with the government's economic policies. To buoy the economy, they suggested the government come up with measures to stimulate consumption and investment. They urged a further interest rate cut of half or a full percentage point, support for international trading, lower tariffs and faster budget disbursement.

Most respondents expected the national election to take place in the fourth quarter for political stability.

The Social Security Office recently announced that 14,683 workers were laid off in the first quarter. Thailand Development Research Institute earlier expressed worries for new graduates and educated workers who could not find jobs or lose their jobs. The institute also expected low-level workers would still find jobs until the third quarter and then manufacturers could switch to foreign workers whose costs are about 20 per cent lower.

Since last year, private investment has been falling due to low confidence in the political and economic outlook. Domestic spending has also declined because consumers have no confidence in their job security.

Low machinery imports in the first quarter confirm low confidence among manufacturers.

The Commerce Ministry reported the country's import value slightly grew by 2 per cent to US$30.5 billion (Bt1.06 trillion) in the first quarter year on year. Capital goods and machinery accounted for 20 per cent of imports.

Apiradi Tantraporn, director-general of the Foreign Trade Department, said lower imports were not attributed to the economic slowdown but rather to low capacity utilisation. Low imports would not affect economic growth and some manufacturers were using locally made goods to reduce costs, she said.

"Remarkably, the import of raw materials and semi-processed goods rose 15 per cent year on year in the first quarter," said Apiradi, adding the rise in raw materials shows the manufacturing sector is operating as usual.

Petchanet Pratruangkrai

The Nation