Special Report: 3 Challenges Facing New Govt

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After the House is dissolved, political parties are campaigning hard to prepare for the upcoming general election. The new government will be facing with three major challenges, including energy prices, minimum wage rise and trade competitiveness enhancement, according to Kasikorn Research Centre (KResearch).

 

As for the first issue, the skyrocketing energy prices and subsidy policy of the government, KResearch estimated that the government might spend over 110 billion baht in total to pin energy prices until September 2011. The state will have to reduce subsidy gradually to avoid long-term impact on the financial stability and urge the society to step up energy conservation.

As for the second issue, many political parties have been boasting that they will increase the minimum wage to relieve low-income earners from the rising living costs if they can form a new government. KResearch viewed that such an initiative should be done together with labour potential enhancement in order to maintain competitiveness of Thai trade and investment. In addition, it must be monitored that the rising minimum wage will not affect the skyrocketing inflation rate.

The other challenge for the new government is to boost competitiveness of the nation. The new government should focus more on enhancing the national competitiveness in the long-term by investing in the national infrastructure and ready the country for the upcoming ASEAN Economic Community establishment in 2015, which will complicate the business environment and competition further.

KResearch expected that the Thai economy this year would grow about 3.0-4.0% with the base at 3.6%. However, impact from the shortage of auto parts and components following the twin disasters in Japan and the southern flood in Thailand will still be a major factor pressuring the Thai economy in the second quarter as it might shrink by 1.0% or only expand by 0.2% compared with the previous quarter.

The aforementioned challenges named by KResearch are only economic issues. A new government will certainly have a hard time ahead as there are still many other problems pending to be solved from deeply rooted political rifts to social affairs confusion.