Nearly 10% of businesses could shut

Meanwhile, the Federation of the Thai Industries (FTI) will today submit to the Finance Ministry and the Bank of Thailand its proposed relief measures for exporters and small and medium-sized enterprises in light of the baht’s appreciation. 

The federation will be requesting them to manage the currency’s stability, put in place capital-management measures and promote exchange-rate risk management among business operators.

The FTI is also asking the central bank to slash the policy interest rate to at least 2 per cent to help discourage capital inflows. The policy rate currently stands at 2.75 per cent, compared with a maximum of 0.25 per cent in the US and 0.1 per cent in Japan.

Yesterday, the dean of Thammasat University’s Economics Faculty, Bhanupong Nidhiprabha, said he thought the Bank of Thailand should trim the policy rate by at least 25 basis points to curb the massive capital inflow into the country. 

He made the remark at the faculty’s press conference on its Thai economic overview for the first quarter.

He also urged the Monetary Policy Committee (MPC) to call an urgent meeting on the baht if the currency continued its rapid rise. It should not wait until the next regular meeting scheduled for May 29, as that would be too late to prevent the impact of the unit’s rise on the economy in the next three to four months, he added.

An MPC source said that if the central bank acted to curb the inflow of foreign capital, it might have to execute several measures at the same time as a single measure might not be enough to achieve the desired effect. 

   

Exports improve

Meanwhile, the Commerce Ministry yesterday reported that exports in March grew 4.55 per cent year on year to US$20.76 billion (Bt598 billion), as monetary easing in the US and Japan had increased demand. The expansion was achieved in spite of the stronger baht, because the export orders had been placed well in advance of last month. 

However, exports are projected to see slower growth in the remaining months of the year because the currency’s strength has damaged Thai export competitiveness, said the ministry’s permanent secretary, Vatchari Vimooktayon.

Imports in March dropped by 11.52 per cent year on year to $21.63 billion. 

The Commerce Ministry’s data showed that exports in the first quarter rose by only 4.26 per cent to $56.96 billion. But it has not yet lowered its full-year export-growth target of 8-9 per cent, as it plans to discuss the situation with private enterprises and trade counsellors overseas next month. Imports in the first quarter surged 8.44 per cent to $64.87 billion, leaving the Kingdom with a trade deficit of $7.91 billion for the period.

Based on the UTCC survey of 600 business respondents, under its worst-case scenario of the baht appreciating to 27-27.9 to the greenback, 12.4 per cent of enterprises would lay off labourers.

If the baht strengthened to 28-28.9, 4.8 per cent of enterprises said they would shut down operations, while 9.3 per cent would lay off employees.

Thanavath Phonvichai, director to the UTCC’s Economic and Business Forecasting Centre, said continued appreciation of the baht would hurt not only the export sector, but also the overall economy.

“Gross-domestic-product growth could be lower than 5 per cent this year if the baht appreciated to 27, while export growth would grow only 0-3 per cent. If the baht appreciated to 28 to the US dollar, the economy would grow by 4-5 per cent, down from the previous projection of 6-8 per cent, while exports would grow only 6-8 per cent this year,” he said.

The UTCC also estimated that 99,776 businesses, mostly small and micro-sized, had already closed down because of the rise in the minimum wage to Bt300 a day.