The malaise in Thailand’s export and manufacturing sector is beginning to feed more and more into employment levels with a series of factory closures before Christmas provoking calls on the government from labour officials to address the plight of those losing their jobs and livelihoods.
Thailand’s economy is set to confirm a growth rate of 2.5% for 2019 as initial figures for the fourth quarter are finalised. It comes as the super baht, which has wrought so much damage on the economy this year, continues to strengthen breaking through the ฿30 to the dollar barrier on Monday to end the day at ฿29.86 to the US currency.
The year 2019 has ended on a less than optimistic note for the Thai economy and economic planners plotting a recovery in 2020 with the baht strengthening and breaking through the psychologically important ฿30 to the dollar rate on Monday to end the day quoted at ฿29.86. Meanwhile, a spate of factory closures in the runup to Christmas has sparked calls from union leaders for the government to clarify claims that there were more factory openings in 2019 than closures.
The Thai baht began 2019 at ฿32.55 to the US dollar and the price quoted on Monday means that it will have ended the year after rising by over 8.26% against this US currency. This month, Thai financial experts had predicted that the baht would continue to strengthen while key international banking giants outside Thailand, had predicted the Thai currency to weaken in 2020.
Exports contracted by 3.3% for the year
The growth in value of the baht has been the prime reason behind a now confirmed 3.3% contraction in Thai exports this year which by mid-year had begun feeding into the domestic budgets of Thai workers with less take-home pay and overtime and by the end of the year, is culminating in a reduction in employment levels and an uptick in unemployment.
Mazda threatening to relocate back to Japan
In the last few days, Mazda, the Japanese car manufacturer, which only as recently as 2018 had been heralding an expansion of its operations in Thailand has been threatening to quit the kingdom and move production back to Japan if the baht continues to spiral in value. The firm had invested heavily at its 800 rai Chonburi facility announcing expansions there in 2013 and 2016.
The threat from the firm indicates just how seismic the economic fundamentals have now changed and unfortunately, not in Thailand’s favour.
Weakening dollar in light trading in New York
The latest upward movement in the baht’s value has been attributed to speculation emerging in the United States towards the end of the year which has seen the Dow Jones and the dollar both drop in light trading.
This was despite an improvement in American consumer confidence and a record online trading season. The key concern in the market is a continuation of the delay in putting to bed the first stage of the US-China trade deal which is now again overdue.
Bank of Thailand confirms a 2.5% growth rate
It comes as the Bank of Thailand has confirmed the growth rate for the last quarter will be in the order of 2.5% with the overall year’s economic growth coming in also at this number.
The data was presented to the media on New Year’s Eve by Pornpen Sodsrichai, the director of banks’ economic analysis office.
Economic data at year’s end makes grim reading
The data for the Thai economy at the end of the year makes, by and large, for grim reading.
Factory output and exports for November were severely down and despite talk of improved government capital expenditure, the figures show a contraction in government expenditure for the period on both a current and capital basis.
This has been explained by a delay in approving the Thai government’s budget for 2020.
Hopes rest on higher public expenditure, better trading conditions and a pick up in exports
Positive sentiment expressed by the bank and government spokespeople now rest on a hoped-for improvement in exports this year from December last year when figures were quite depressed.
The government is also hoping for some amelioration in trade tensions between the United States and China.
US-China trade tensions here to stay
This, even experts concede, is now becoming more difficult to see. The deal that the two trading giants are having trouble finalising is only a first tentative step towards rapprochement and seasoned observers in China are suggesting that senior Chinese authorities, in spite of the trade war, have become more determined than ever to push a symbiotic relationship between large Chinese firms and government subsidies which is having a disturbing effect on world markets from shipbuilding to the technology sector.
In the US, there is a similar sentiment with growing public support for the US administration’s policy on China and even a grudging acceptance by the US President’s critics of the need for a tough stance on trade deals. This is despite the continued disdain for the US President and his policies at the upper echelons of international world bodies and those who had hitherto engineered and nurtured the world consensus on economic affairs.
Catastrophic effects for Thailand as China has emerged as its biggest competitor in ASEAN
For Thailand, the effects have been catastrophic and must be fully understood before the government can properly correct matters.
There is ample evidence to suggest that Thai made goods have been replaced within the ASEAN market close to home by Chinese exports sold at lower prices.
While the Thai baht may have gained over 8.2% against the dollar, it gained more against the Chinese Yuan and other regional currencies particularly after the Chinese effectively devalued their currency on August 5th this year.
At the same time, Chinese goods, subsidised by the Chinese government and destined for the US, have ended up being dumped on local markets.
Weaker demand both at home and abroad
On Tuesday, Ms Ponrnpen of the Bank of Thailand confirmed that Thailand has experienced a period of weakening demand both at home and externally.
This has seen the country’s utilisation of existing capacity slumping which has further disincentivised both public and private investments not only by the private sector by also by the state sector.
Labour boss asks for qualitative information on new business and job openings referenced by government
This weekend, Chalee Loysung, the Chairman of the Thai Labour Reconciliation Committee asked for credible information to be supplied to support the government’s recent claims of more businesses opening in Thailand than closing.
He also asked for information on these firms as to whether they are now recruiting workers and on what terms.
Firms in the Eastern Economic Corridor may not be employing Thai workers say labour leaders
The labour official suggested that many of the firms being referred to may be part of the government’s flagship project, the Eastern Economic Corridor. He questioned whether many of these firms are Chinese owned and whether they plan to hire local Thai workers as opposed to using advanced machinery and robotics.
He demanded to know what the government was doing about the growing number of people losing their jobs in the manufacturing sector. ‘The critical question is what are we going to do with more and more people losing their jobs,’ he asked.
Labour officials call for the government to assist in rescuing viable firms and preserving jobs
The Chairman of the Employees Labour Development Council is Manas Kosol. He said he was preparing for another tough and difficult year in 2020.
The labour officials pointed to a need for the government to immediately examine firms already seeking protection under Section 75 of the Thai Labour law which allows them certain reliefs and to pay salaries at a 75% rate for workers.
Mr Chalee said the government should take action to identify which of these firms might be rescued and which companies are beyond hope in the current economic climate.
He indicated that many companies were already warning of a drop in their order books while the layoff of workers is accelerating.
Government official rejects any claim that there has been a surge in involuntary layoffs this year
The Secretary-General for the Department of Labour Protection and Welfare, Apinya Sujarittanont, has confirmed that firms in the agricultural sector, as well as car manufacturing and auto parts, have been hit hard by the current downturn.
However, he rejected claims that there has been a large rise in workers laid off this year. Mr Apinya pointed out that out of 174,082 workers who were made unemployed this year, only 27,859 had been made redundant with 126,384 resigning their positions while 19,8339 had seen their contracts expire.
Mr Apinya forecast that an increase in Thai government budget spending next year would see a stronger economy and more jobs being created.
Gave details on three industrial firms which closed their doors between December 19th and 23rd
The senior official give details of the three firms that had closed down on December 19th, 21st and 23rd of the month in Chonburi, Ayutthaya and Samut Sakhon with the loss of 63, 32 and 997 workers respectively.
He said that 13 of the workers in Seishn Co., the first factory, involved in auto spare parts manufacturing, had received compensation. The second was a company called Mizuno Plastic Co. while the third, Pongpara Codan Rubber Co., had seen 299 workers already being compensated for loss of employment.
One of the workers of the Pongpara Codan Rubber Co. who submitted a petition to the Labour Ministry on Friday was ‘Ae’ who told reporters that both he and his wife worked at the factory and were shocked with its sudden closure.
‘There were no warnings, no signs,’ he said. ‘The workers felt quite secure because the firm always had enough money to pay workers three months worth of bonus around Chinese New Year every year.’
Deputy PM Somkid suggests that some Thai workers must move over from industry to tourism
It comes as, before Christmas, the Deputy Prime Minister with responsibility for the economy Somkid Jatusripitak tasked the National Economic and Social Development Council to work closely with Thailand’s Board of Investment on a range of initiatives from measures to alleviate the debt of small firms to progressing the Eastern Economic Corridor project and protecting the incomes of workers within the huge project.
Mr Somkid also tasked the bodies to work together to boost Thailand’s tourism industry so that it can provide alternative employment to workers displaced from the manufacturing sector.
Further reading:
Thai economy remains sound says Fitch the ratings agency as the baht’s surge may be over for now
Bank of Thailand governor warns about growing debt levels, calls for sufficiency economic thinking
Finance minister ready to take further action to prevent the Thai economy falling into recession
