Daily minimum wage hike to release Bt140bn in private sector spending

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BANGKOK, July 14 – The promised daily minimum wage for workers nationwide to Bt300 (US$10) by the new Pheu Thai-led government may cause the private sector to spend up to Bt140 billion, according to the Centre for Economic and Business Forecasting of the University of Thai Chamber of Commerce (UTCC).

Centre director Dr Thanawat Polvichai said the private sector in Thailand and abroad fear the wage raise policy will impact on higher production costs, particularly on the costs of small- and medium-sized enterprises (SMEs).

He warned that foreign investors might relocate their production bases to other countries with lower production costs such as Indonesia and that Thailand will not be attractive for new foreign investment as a result.

The Pheu Thai Party promised in its election campaign to raise workers’ minimum wage as early as January next year.

According to Dr Thanawat, the new government should have some measures to help alleviate the private sector’s burden.

Regarding Pheu Thai’s price guaranteed scheme for agricultural produce, UTCC questioned how the new administration will guarantee the prices of goods, given that entrepreneurs’ production costs structures are considered through Department of Internal Trade. The director added that the centre does not want the government to twist the real costs of production.

Meanwhile, this year’s inflation is expected not to go beyond 4 per cent, according to Ministry of Commerce, due to Pheu Thai Party’s policy to control the prices of goods and to scrap the Oil Fund’s diesel subsidy.

The party’s policies of wage raise and rice mortgage are not to affect the inflation rate either, Mr Thanawat said, while the Bank of Thailand (BoT) raised its key interest rates to deal with inflation.

However, the new government must work out how to keep inflation at bay after the daily minimum wage raises comes into effect early next year.

The Bank of Thailand’s Monetary Policy Committee raised the one-day repurchase rate to 3.25 percent, up from 3.0 per cent previously, saying the prospective increases in the minimum wage and fiscal spending amid continued economic growth will likely add to inflationary pressure and may result in heightened inflation expectations.