Ministry: wage hikes and smart cards will boost consumption
The passion many Thais have for shopping is actually an important driver of the Kingdom’s economy, and the Ministry of Finance said last week it expects Thais, especially low-income Thais, will spend their way to a stronger economy this year.
A raise in the minimum wage, the issuance of smart cards, and government support programs will result in an increase in consumption among low-income groups, according to the Fiscal Policy Office (FPO) at the Ministry of Finance, which said the programs are designed to lessen inequality but would also benefit the economy as a whole.
Exports are the strongest piston in the Kingdom’s economic engine, but the government is committed to raising consumption’s role in economic growth in order to achieve a more balanced economy. That should also increase the resilience of the Thai economy should recessions or economic volatility strike Thailand’s key export markets.
Around the region, economies that rely more on consumption have exhibited more robust growth rates in recent years than export-oriented economies, particularly in the aftermath of the global recession that began in 2008. Traditionally, export-reliant economies, such as Thailand’s, have performed better over the longer term, and export growth did much to lift Thailand to middle-income status as a country.
The FPO has forecast that private consumption will grow at about 3 percent or slightly higher this year, which still slightly trails forecasts for overall gross domestic product growth that have generally been close to 4 percent, said Soraphol Tulayasathien, director of the bureau of macroeconomic policy at the FPO.
The 3 percent growth figure is better, however, than private consumption during the last quarter of last year, which was slightly higher than 2 percent, as measured by sales of durable goods. Even that figure was pushed higher by a 33 percent rise in passenger car sales, the highest sales surge in several years.
The general trends, however, have been positive, Suraphol said. Value-added tax (VAT) receipts rose by 5.9 percent year-on-year in December, and VAT on domestic purchases of products and services jumped 6.8 percent, he said. Those statistics suggest a recovery in purchasing power among consumers is underway.
Beginning April 1, the daily minimum wage is slated to rise, and an additional living allowance of $3.1 to $6.2 a month will be granted to welfare recipients who sign up for jobs and skills training programs.
In addition, hundreds of millions of dollars from the supplementary budget will be added to Village Funds, the micro-lending funds managed by all the Kingdom’s villages to help generate economic opportunities among lower-income people and communities.