Bangkok--12 Feb--Krungthepturakij
40.1% of the CEOs surveyed believed that the Thai economy in the first quarter of 2013 would perform better than the fourth quarter last year. Minimum wage hike added another 5.1% to the cost of doing business. The rise of Baht and gloomy global economic outlook worried CEOs.
Krungthepturakij in collaboration with Dhurakij Pundit University Research Center (DPURC) conducted a survey of 418 CEOs on economic and business outlook; the survey also asked about the effect of nation-wide minimum wage hike on cost of doing business as well as how they coped with such effect. The survey was conducted from 29th January to 4th February 2013.
On economic outlook in the first quarter of 2013, 40.1% believed that the economy would perform better than the last quarter of 2012; 48.8% about the same; and 11.1% perform poorer.
Sentiment index of Thai economy in January is 39 points and declines subsequently to 22 and 16 points. While positive value of the index represents favorable sentiment, its declining trend reflects CEOs’ concerns about the economy. Such concerns were driven largely by three factors: the contraction of U.S. economy in the last quarter of 2012; the rise of Baht value; and the imposition of nation-wide minimum wage hike. The last two factors would certainly dampen the country’s competitiveness.
Four business performance sentiment indices- revenue, cost, employment and liquidity- indicate that doing business in the first quarter of this year is not going to be a smooth sail. Relatively flat revenue index implies that revenue will grow at a slow rate; positive, but falling, cost index signals that CEOs expect the cost to keep on rising- albeit at a slower rate. Rising cost and slow growth of revenue result in a fall in liquidity index in February and March. Such pessimistic outlook also influences employment decision. With positive but falling employment index, slow growth in employment is to be expected.
On the factor that would influence business performances in the first quarter, the top five are i) global economic condition, ii) Thai economic condition, iii) increased wage cost, iv) transportation and energy costs and v) the rise in Baht value as well as increases in costs of raw materials.
When asked about the impact of the wage hike on costs of doing business, 22.4% said their costs remained unaffected; 13.9% said their costs fell; 63.7% said that they had been affected by the policy. For those affected, their labour costs, on average, had increased by 10.3%; their total costs of doing business also rose by 5.1%.
On measures used to cope with the impacts from the wage hike (more than one answer is possible), 63.9% focused on increasing workers’ efficiency; 61.4% reduction on non-labour costs; 44.1% price adjustments; 39.5% substituting machines for workers; 38.6% reduction in long-term investment expenditures; 37.4% reduction in overall business process; 30.2% marketing and sales promotion; 28.1% outsourcing; and 11.6% reduction in welfare provisions.
The result from this round of the survey highlight the importance of three major factors that would affect business performance: global economic slowdown; the rise of Baht; and the effects of minimum wage hike. The sentiment indices which represent expectations of CEOs also point to possibility that the first quarter of this year will be quite a challenge for businesses in Thailand.