BANGKOK: Thailand’s labour market is showing growing signs of vulnerability as more businesses temporarily suspend operations under Section 75 of the Labour Protection Act, the Bank of Thailand (BoT) has warned.
Although lay-off indicators and employment within the social security system were broadly unchanged in July from the previous month, other labour indicators pointed to significant underlying weakness.
Pranee Suthasri, senior director of the BoT’s Macroeconomic Department, said temporary suspensions were increasing among businesses exposed to intense competition, particularly manufacturers of automotive parts, garments, rubber products and plastics.
Net new business formation was also declining as more companies ceased operations, with closures concentrated in the trade and property sectors.
Recent investment has meanwhile become increasingly “labour-light”, requiring fewer workers than investments of a comparable value in the past.
The warning came as Thailand’s economy expanded from June, supported by the global technology and artificial intelligence (AI) cycle, a temporary easing of disruption from the Middle East conflict and continued government measures, including the Thais help Thais plus scheme and state welfare card support.
Most demand and supply indicators improved, although agricultural output declined.
“If we look at the labour market, the BoT is quite concerned about workers’ vulnerability because more establishments facing intense competition are reporting temporary suspensions under Section 75 of the Labour Protection Act,” Pranee said.
She added that declining net business formation, rising closures in trade and property, and increasingly labour-light investment could weigh on employment in the months ahead.
Section 75 applies when an employer temporarily suspends all or part of its operations for a significant reason other than force majeure.
Official Labour Ministry guidance requires employers to pay affected employees at least 75% of their normal working-day wages throughout the suspension.
Asked whether Thailand was heading towards “Japanification”, a period of prolonged low growth and low inflation, the BoT said several indicators appeared similar but the underlying causes were different.
Thailand still has unused potential in manufacturing and services, while many of its difficulties stem from long-standing structural weaknesses.
High household debt remains a central concern because many households lack sufficient income to cover living expenses and debt repayments.
The BoT has sought to address the problem through debt restructuring and responsible lending measures, but Pranee said increasing household income was essential to achieving a lasting solution.
Businesses must also use technology to transform their operations and raise productivity, allowing the country to make fuller use of its existing economic capacity.
Merchandise exports excluding gold increased in July, led by technology products, while industrial production expanded in line with overseas shipments.
Export value rose 2.3% from June. Growth was led by electronics, computer components and memory devices shipped to the United States, as well as printed circuit boards exported to Hong Kong and China.
Durian exports to China also performed strongly, but vehicle shipments declined, particularly exports of pickup trucks to the Middle East and South-East Asia.
Tourism improved in both visitor numbers and revenue. Thailand welcomed 2.5 million foreign visitors in July, an increase of 7.6% from the previous month.
Long-haul markets, particularly Europe and the Middle East, provided much of the growth.
Chinese arrivals also recovered as flight capacity moved closer to normal, supported by summer holidays in several countries.
Short-haul markets excluding China recovered more slowly and will require monitoring.
Private consumption increased 1.2%, driven mainly by spending on services, particularly hotels and restaurants.
Government measures and the holiday period towards the end of July also supported activity.
Spending on durable goods increased with stronger sales of passenger vehicles and pickup trucks.
Consumer confidence improved following government measures to reduce living costs and an easing of Middle East tensions during the survey period.
Consumers, nevertheless, remained concerned about high debt burdens and living costs.
Headline inflation declined as energy prices fell in line with global oil prices and government measures.
Core inflation stood at 1.34%, with businesses gradually passing higher costs through to prepared food prices.
The baht was volatile during July, weakening on concerns over the Middle East conflict before strengthening in August alongside movements in the US dollar.
The BoT expects the Thai economy to continue recovering, although growth remains concentrated in technology products and parts of the tourism industry rather than spreading evenly across sectors.
The global technology and AI cycle will remain a vital driver of manufacturing and exports.
Leading export indicators have improved as purchasing managers’ indices rose in several countries, largely because of technology-related manufacturing.
The BoT said exporters outside the technology sector would need to demonstrate that they could adapt to changing competitive conditions. — The Nation/ANN
