Media reports and analyses from various news agencies are in agreement about the Thai economy. And it is not at all good news.
Despite the government’s efforts to stimulate the economy, it is clear that the 2019 economic growth rate will fall far short of the already very modest 3% target.
Blame it on the failure to tame the strong baht, which is severely affecting the export sector, resulting in negative growth. The situation is further aggravated by escalating trade tensions between the US and China. As a trade partner to both economic giants, Thailand cannot escape the economic fallout.
In addition, China’s economic growth is declining. As a result, the number of Chinese tourists in 2019 has fallen drastically due to their government’s policy of discouraging outbound tourism.
Since Thailand depends heavily on exports and tourism, the trade war and China’s economic slowdown has hit the country hard. Unemployment is inevitably on the rise since tourism-related businesses are our biggest employers.
My research also confirms that unemployment is rising, a situation that will not improve if external factors out of Thailand’s control continue to persist.
Apart from the figures on open unemployment, we can gauge the unemployment situation even quicker by the number of workers who receive unemployment benefits from the Social Security Office.
Under Section 33 of the Social Security Act, BE 2533, insured workers can claim unemployment benefits when they resign and when they are laid off. For voluntary resignation, they are entitled to 30% of their average salary base for 90 days.
With increasing job insecurity, many workers choose to resign before their companies close down so they can claim unemployment benefits. According to the Labour Ministry, voluntary resignation has been steadily rising over the past five years. It will rise further next year if the Thai economy remains in the doldrums.
Workers who are laid off, meanwhile, are entitled to receive 50% of their average salary base for six months. If they cannot get new jobs or do not join the Labour Ministry’s training programme to be rehired, then most of them will most likely end up unemployed.
Labour Ministry statistics also show that the number of workers claiming unemployment benefits rose more than 15% in 2018, from about 130,000 in January 2018 to 150,000 at the end of the year.
In 2019, from January to August, the number of unemployment benefit claimants rose to 190,000, an increase of more than 22% from the previous year. Given the stagnant economy, unemployment will continue to rise until the end of this year. Next year and the years to come will be no better if the government fails to stimulate labour demand through more effective economic policies.
In short, it all depends on whether the government can revive the economy through a more effective fiscal policy to reach the 3.5-4% growth target.
To do so, it is necessary to tackle the country’s strong baht so that Thailand becomes competitive again in the global market. With productivity in the real sector facing many hurdles, it is important that the strong baht be tamed to sustain the export and tourism industries, the country’s main foreign income earners and keys for economic growth. If not, Thailand risks losing out to other trade rivals.
The bad news does not end there.Apart from domestic slowdown, China-US trade tensions, Brexit crisis, and trade sanction threats from the United States, more than 570 products from Thailand will lose tariff privileges under the US Generalised System of Preferences, or GSP, in the next six months due to the country’s poor performance on labour rights.
The GSP cut will further damage the country’s export revenues, with serious repercussions for the value and supply chains as well as the logistics industry. Both big companies and SMEs will be hit hard. To survive, businesses will need to cut overtime work and subcontractors. When worst comes to worst, layoffs are inevitable.
Next year will see more companies close down, starting with SMEs struggling with insufficient cash flows and poor business. Without timely and effective government rescue measures, worker layoffs and resignations will rise even higher.
The government should launch the following measures to alleviate unemployment problems.
First and foremost, revitalise the economy urgently by tackling the strong baht to stimulate exports and boost tourism income.
Next, help SMEs that are in financial trouble. There are more than 500,000 small businesses in the country. Many of them need urgent help. Information from financial institutions can identify where they are and what help they need to survive this difficult period.
Also necessary is to help former social security beneficiaries get rehired. The Social Security Office needs to work with the Department of Employment and the Department of Skill Development under the Ministry of Labour to set up effective training programmes for them.
Vocational students and new graduates who are unemployed should also receive assistance. The government’s “National Development Volunteers” scheme is timely since it can engage these unemployed youths in healthcare or community development projects for at least six months instead of letting valuable human resources go to waste.
One way to keep employees in the workforce is to set up a network between companies to recruit or exchange workers, coordinated by the Department of Employment.
Amid rising unemployment, the government should also consider slowing down the import of new migrant workers or halting work-permit extensions for medium-skilled foreign workers in favour of employing Thai nationals to increase their job opportunities.
Given the lack of measures to stimulate the economy and curb unemployment – which says volumes about the government’s economic performance – the current economic gloom is here to stay.
Yongyuth Chalamwong is a research director for Human Resource Policy at the Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.
First Published: Wednesday, December 11, 2019