Thailand: SMEs fret over wage hikes, energy costs

Small and medium-sized enterprise (SME) optimism fell for the three months to March as firms worry that the imminent minimum wage hikes and rising energy costs will push up their operating costs, according to a quarterly survey by TMB Analytics, the research unit of TMB Bank.

The TMB-SME Sentiment Index declined to 51.9 in the first quarter from 52.4 in the previous three months because of anxiety over rising costs from daily minimum wage hikes and energy, although SME confidence in income improved, said head economist Benjarong Suwankiri.

The SME confidence index for income increased to 65.9 during the January-to-March quarter from 62.9 in the final quarter of last year, while the confidence index for operating costs dipped to 37.8 from 41.9.

The index surveyed 1,100 SME operators across the country in the fourth quarter of 2017.

The number of SMEs who voiced concerns over operating costs increased to 47% of the total survey participants, from 43% in the previous quarter. Labour and energy costs were major concerns for SMEs across the country, following an increase in the global oil prices and the impending daily minimum wage hikes, Mr Benjarong said.

“Cost management, especially for labour and oil prices, is a challenge for SMEs. Wages are the key expense for small businesses,” he said. Operators will probably spend up to two quarters adjusting to the wage hike, he said.

The cabinet last month approved raising the daily minimum wage hike by 5-22 baht nationwide from April 1. The highest increases will be seen in Chon Buri, Phuket and Rayong.

Mr Benjarong expects the impact of the higher minimum wage on SME operators to be limited, as they have already adjusted in anticipation of the new minimum wage and some operators already offer higher wages than the minimum.

The service sector is expected to be hit the hardest by the minimum wage hikes and the sector’s profit will drop by 1% — higher than manufacturing and trading sectors at 0.3% and 0.2%, respectively, he said.

Labour makes up the highest expense for the service sector at 22% and accounts for 9% and 5% of the manufacturing and trading sectors, respectively.

Over 60% of the surveyed SME operators in the three months to March were optimistic about income, rising from 55% in the previous quarter.

The rising optimism suggests improvement in domestic consumption.

TMB Analytics forecasts private consumption growth of 3%, which is still lower than the country’s GDP growth estimate of 4.2% this year.

The research house predicts that SME non-performing loans in the overall banking industry have already peaked and will gradually decline to below the current level of 4% by the end of this year.

The optimism is based on the expanding economy, higher purchasing power and improving income of business operators.

Source: https://www.bangkokpost.com/business/news/1408770/smes-fret-over-wage-hikes-energy-costs