All low-paid state workers could get Bt2,000 pay hike

The Finance Ministry has projected that the economy will shrink 3 per cent this year, however, signs of recovery are emerging.

Finance Minister Korn Chatikavanij said yesterday he agreed with Prime Minister Abhisit Vejjajiva, who made clear that the government would treat all employees of state enterprises equally, regardless of whether their organisation was making a profit or not.

His comment came as trade unions at the Metropolitan Electricity Authority and Provincial Electricity Authority negotiated with the Interior Ministry for a monthly stipend of Bt2,000 for workers with a monthly salary under Bt50,000.

The moves prompted the Finance Ministry to prepare to offer the same stipend to workers in similar positions at other state enterprises. Officials anticipate other trade unions would ask for a rise if the Interior Ministry had agreed to such a deal.

Areepong Bhoocha-oom, director general of the State Enterprise Policy Office, said if the government agreed to give workers with salaries under Bt50,000 an extra Bt2,000 a month for a year, it would have to pay some 275,000 workers in 60 state enterprises at total of Bt4.7 billion annually.

However, if the government chose to pay the Bt2,000 stipend or allowance to those whose income was Bt15,000 and less, about 63,000 workers would benefit. And the total cost would be Bt1.5 billion annually.

Meanwhile, Fiscal Policy Office spokesman Ekniti Nitithanprapas said the Thai economy passed its lowest point in the first quarter, when gross domestic product (GDP) sank by 7.1 per cent.

He said the office projected GDP would contract by 3 per cent this year, down from its previous forecast of a 2.5 per cent contraction.

There were signs, he said, the economy was recovering from the sharp contraction in the first quarter. In the second quarter the economy shrank less, with a contraction of 4 to 5 per cent, he said.

The Bt116.7-billion stimulus package by the government contributed to this improvement.

However, growth would remain at about minus 3 or 4 per cent in the third quarter, before rebounding to 2 or 3 per cent in the final quarter of this year.

He said private consumption showed signs of improving last month with total value-added tax down 17 per cent, which was better than the 22-per-cent contraction in April. A sharp slump in imports was a key factor in the lower VAT collection.

Sales of motorcycles sank by 9.2 per cent in May compared with a drop of 17.7 per cent in April, he said.

However, he said private investment remained weak. Imports of machines dropped 25.5 per cent for the sixth month fall in a row.

Government spending last month rose 27 per cent year on year to Bt161 billion. Public spending is a key factor in boosting the economy.

Although the country faces a sharp drop in exports, which were down 26.6 per cent last month, the Finance Ministry projects that the country will run a current account surplus of US$20.4 billion, as high as 9 per cent of GDP this year, due to a greater fall in imports.

The large surplus would push baht to rise, which could hurt the export sector. "Exporters may get a smaller amount of baht from their dollar earnings," Ekniti warned.

He said a stronger baht may not hurt export volumes much but it would have an impact on exporters' baht earnings, which could lead to workers being laid off. He estimated that the baht would be about Bt34.7 to the US dollar this year.

However, he said unemployment was expected to be 2.5 per cent of the 37 million labour force, down from the previous forecast of 3.8 per cent of workers being out of jobs.

The ministry estimated that private investment would drop by 12.4 per cent, but public investment was expected to expand by 7 per cent due to government stimulus moves. Private consumption was tipped to drop by 0.3 per cent, while headline inflation is expected to be 0.5 per cent.

Ekniti said the central bank could lower its policy rate from 1.25 per cent to 1 per cent.

He said the Bank of Thailand could use both a weaker exchange rate and lower interest rate to boost economic growth.