CEOs see challenging period for Thai economy in the first quarter
Less than half of Thai CEOs are bullish on the economic outlook for the first quarter of this year, due chiefly to the contraction of the US economy in the last quarter of 2012, the baht appreciation and the nationwide wage hike, according to a survey.
The CEOs said the last two factors were pulling down the country's competitiveness, as the wage hike added to the cost of doing business by 5.1 per cent while the stronger baht will dampen export demand.
"The opinions showed that the Thai economy would face a very challenging period," said Krungthep Turakij and Dhurakij Pundit University Research Centre in a joint statement, after surveying 418 CEOs for their Sentiment Index, conducted during January 29-February 4.
While only 40.1 per cent of the CEOs believed that the Thai economy would perform better in the first quarter of this year than the last quarter of 2012, 48.8 per cent expected no change
while 11.1 per cent expected a poorer outlook. Overall, the sentiment index of the Thai economy in January is at 39 points, before heading down to 22 and 16 in the subsequent two months, respectively.
Through the survey, business performance in the first quarter in terms of revenue, cost, employment and liquidity is not expected to be bright. The relatively flat revenue index implies that revenue will grow at a slow rate. On the contrary, the cost index signals that CEOs expect the cost to keep on rising, albeit at a slower rate. The rising cost and slow growth of revenue will result in a fall in the liquidity index in February and March. Such a pessimistic outlook will influence employment decisions. A slow growth in employment is expected.
The factors that would influence business performances in the first quarter are: the global economic condition; the Thai economic condition; increased wage cost; transportation and energy costs; the rise in baht value; and increase in the costs of raw materials.
When asked about the impact of the wage hike on the cost of doing business, 22.4 per cent said their costs remained unaffected; 13.9 per cent said their costs fell; 63.7 per cent said that they had been affected by the policy. For those affected, the labour costs on average had increased by 10.3 per cent and their total cost of doing business also rose by 5.1 per cent.
Regarding measures to cope with the impact from the wage hike, the CEOs had a few suggestions: 63.9 per cent focused on increasing workers' efficiency; 61.4 per cent on reduction of non-labour costs; 44.1 per cent on price adjustments; 39.5 per cent on substituting workers with machines; 38.6 per cent on reduction in long-term investment expenditure; 37.4 per cent on reduction in overall business process; 30.2 per cent on marketing and sales promotion; 28.1 per cent on outsourcing; and 11.6 per cent on reduction in welfare provisions.