Gloomy outlook sees FTI index hit 10-month low
The Federation of Thai I ndustries (FTI) index fell for a third consecutive month to the lowest in 10 months in June as weak purchasing power persisted at a time when fears over strong punishments under the new labour law cut confidence among investors.
FTI chairman Chen Namchaisiri said the FTI index fell to 84.7 in June, down further from 85.5 in May and 86.4 in April.
“Investors are still concerned about household spending which remains weak as consumers are neither certain about their incomes nor the Thai economy, which is still fragile,” he said.
He said major negative factors that weighed on the index included concerns over the new Royal Decree on Recruitment of Foreigners.
Although Prime Minister Prayut Chan-o-cha has imposed the powerful Section
44 to postpone the implementation of the law for six months, investors were unsure about how to react to the changes, which impose harsher penalties for illegal employment of foreign labour.
Uncertainty about the changes prompted many migrant workers to flee Thailand and return to their home countries with no confirmation on whether they would come back since economies in the neighbouring countries are growing rapidly and have strong demand for workers, he added.
Mr Chen said Thai investors, particularly in labour intensive and production sectors, should adjust by switching reliance to automated systems to help reduce risks from labour shortages in the long term.
Small and medium-sized enterprises (SME) are most likely to be hit by a labour shortage, as they lack the budget to switch from a labour-intensive workforce to automation, he said. Another negative factor is the strengthening of the Thai baht, which will hurt Thai exports and eventually cut investor confidence.
“The value of the baht continues to rise further and we need the government to step in to support exports and the economy,” said Mr Chen. The baht has risen more than 6% so far this year, and is currently the strongest currency in the region. It was around 33.6 baht per dollar yesterday.
Given the volatile Thai baht against the weaker greenback, Mr Chen urged Thai investors and exporters to switch to the new market of Cambodia, Laos, Myanmar and Vietnam, where trade is handled in baht and other regional currencies, as that could help cut risks over trading in dollarbased markets.
Mr Chen said the gloomy outlook also prompted the FTI to revise demand for cement this year, which is expected to drop by 5.2% from 15.2 million tonnes of consumption last year, as construction of most major infrastructure projects has not yet started. He said the trend should pick up by the year’s end, when most real investment and infrastructure construction are due to start.