Thais Debate Rising Cost of Living: Perception or Reality

September 7, 2013, 3:27 PM

Thais Debate Rising Cost of Living: Perception or Reality

By Warangkana Chomchuen

BANGKOK–For Thai consumers, September has delivered a triple whammy. The costs of cooking gas, electricity and expressway tolls rose at the start of the month. Electricity went up 0.07% per unit used. Drivers using Bangkok’s elevated highways can expect to pay about $10 more a month. Cooking gas prices will increase incrementally every month over the course of 12 months. By August next year, the cooking gas will have risen by 38% to 25 baht (80 U.S. cents) a kilogram of gas from 18 baht. These increases might not seem a big deal, and that’s what the government officials have been telling the public. The increases, they said, would barely budge the country’s inflation rate. But the new price increases have nevertheless stirred up public anger – and whipped up a debate over whether it will lead to a sharp increase to living costs.The Thai government has already raised a minimum wage nationwide to 300 baht since the beginning of this year- a third to twice the previous rate, depending where it is paid – prompting many consumers to speculate that wage burden on business operators would soon add to the prices of goods.

On average, a Thai person earned $5,168, or $430 a month, in 2012, according to data from the country’s National Economic and Social Development Board. On average, each household spends 34% of their income repaying debt. Household debt has climbed significantly over the past five years, eating into spending on food and other items. Thailand’s household debt accounts for 78% of gross domestic product, a level that is beginning to worry the central bank.

Government officials don’t appear to have soothed concern over the issue.

A senior official at the Commerce Ministry, in charge of maintaining domestic prices of goods, said it was merely a “perception” of the consumers that goods are expensive, setting off angry responses in social media and online forums.

One consumer reportedly called the ministry’s consumer hotline and threatened to splash acid on the official, permanent secretary Watcharee Wimuktayon, a few days after she made her marks, The Nation newspaper reported.

Ms. Watcharee might have a point, though. Inflation in August stood at 1.59% on year in August, the lowest rate since October 2009.

Still, the argument over whether these price increases are real reflects a souring sentiment to how Prime Minister Yingluck Shinawatra’s Puea Thai Party is handling the country’s economic problems.

After having a relatively easy ride during its first two years in office, Ms. Yingluck’s administration is beset by a slew of problems, ranging from mounting losses from a multibillion dollar rice-subsidy program to raucous protests by rubber farmers demanding help as global prices for the commodity slide.

Ms. Yingluck often appears to be aloof, if not absent, as a leader, preferring deputies such as Finance Minister Kittiratt Na-Ranong to do much of the heavy lifting. When a group of Thai reporters asked her Friday about the rising cost of living, Ms. Yingluck declined to comment and walked away.

Thailand’s economy, meanwhile, has entered a technical recession after growth rates declined for two consecutive quarters. The Bank of Thailand in August revised the country’s growth forecast down to 3.9% this year from 4.3%, and consumer confidence has slid for five consecutive months.

“More than anything, the rising cost has a psychological impact on consumers’ confidence,” said Whachira Khuntaweetep, assistant director at the University of the Thai Chamber of Commerce’s forecasting department, which collates the consumer confidence figures. “People feel more cautious about spending. It makes them worried about the future.”

The Commerce Ministry said it will closely monitor the prices of goods to make sure lower-income Thais aren’t affected, but questions remain over how much they can control prices.

In many instances, goods, especially food prepared at road-side street-stalls, grow more expensive after cooking-gas prices rise.

“It’s not that much, but when you combine it with the prices of pork, eggs, chicken that have already gone up, then it’s a lot,” said Nuttapong Setkitdee, a 27-year-old noodle-shop owner in Bangkok. “I’ll try to keep my noodles prices unchanged as long as I can.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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