Thai prime minister-elect Yingluck Shinawatra scheduled a strategy meeting yesterday to review urgent action to revitalize the economy, but business leaders fear her populist wage policies will spark a surge in inflation.
Yingluck won a landslide election victory on Sunday, backed by votes from the poor lured by promises such as wage rises, a household debt moratorium and better welfare and healthcare.
“We will consider measures that can be taken immediately after taking office,” said Yingluck, who will be Thailand’s first female prime minister.
Thailand’s business leaders are worried that if her Puea Thai Party government implements all its big-spending policies, it will stoke price rises at a time when the economy is already struggling with inflation.
One proposal is a nationwide minimum wage of 300 baht (US$9.8) per day, as much as 90 percent higher than the current minimum set for each province around the country.
That would be a huge amount for manufacturers to absorb, said Richard Han, chief executive of integrated circuit packager Hana Microelectronics.
“Two things will happen: Either they will make less money or they’ll try to put their prices up and cause inflation ... This could put you on a [wage-price] spiral,” he said.
The Thai economy expanded a robust 7.8 percent last year and is projected to grow between 4 percent and 5 percent this year, fuelled by strong export growth and increased consumption.
However, the central bank has sounded warnings about inflation, which hit 4.19 percent in May, its highest since September 2008. Economists expect the central bank to raise interest rates at its meeting next Wednesday after seven increases since July last year.
Comments by Puea Thai’s -economic chief Suchart Thadathamrongvej, a candidate to be finance minister, that Thailand should adopt a managed fixed exchange rate similar to that of Singapore or China will also concern investors, as they raise questions about central bank independence.
“What we need, perhaps, is a clear foreign exchange formula in working out a competitive rate for the baht, perhaps based against a flexible basket of currencies,” he said.
That would mark a turnaround for Thailand, which abandoned a fixed exchange rate in 1997 when it floated the baht against the US dollar and other currencies.
Sunday’s election result was seen as a rejection of Thailand’s traditional establishment of generals, “old money” families and royal advisers who backed the outgoing government.
Analysts say the election should usher in a period of stability after six years of often bloody political crisis.
Thailand’s politically powerful military has said it will accept the result, adding to a sense of stability in a country plagued by unrest since the army staged a coup in 2006 to oust then-Thai prime minister Thaksin Shinawatra, Yingluck’s brother.
However, the question of whether she will seek the return of her brother, now living in self-imposed exile in Dubai after being convicted of abuse of power, remains an explosive issue.
His return could again spark unrest in Thailand.
Yingluck told CNN that Thaksin’s case would be reviewed as part of national reconciliation efforts. Any move to include legal cases in an amnesty as well as political cases would be controversial.
“I can’t do anything special for my brother,” she said, adding she would follow the rule of law.
Puea Thai won 265 seats in the 500-seat parliament, according to the latest election tally, and could govern alone, but Yingluck will form a five-party coalition with 299 seats.
Her decision to form a coalition is seen as projecting an image of broad parliamentary support and easing political friction as the new government seeks to implement policies.
That government will probably not be officially sworn in until early next month after being approved by the king.
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