The rate of unemployment in Thailand could reach 3-5 million people due to the coronavirus outbreak. It would be the highest unemployment figure ever seen on record, said Siam Commercial Bank’s Economic Intelligence Center (EIC).
Representatives from the private sector, namely the Joint Standing Committee on Commerce, Industry and Banking, predicted earlier that the figure could be as high as 10 million people.
With the number of workers at risk of losing their jobs reaching 6.5 million, the EIC estimates that the unemployment figure can surge to 3-5 million people, increasing the unemployment rate to 8-13 per cent of the current workforce.
That would be the highest number since 1985, surpassing the previous record of 5.9 per cent in 1987. It would also be much higher than the rate during past crises, such as the Asian Financial Crisis when the rate was at 3.4 per cent in 1998 and 1.5 per cent during the previous Global Financial Crisis in 2009.
EIC explained that Thailand’s labour force has been weakening because of the economy which was slowing down even before the outbreak began in January.
In 2019, the average number of employed persons was at 37.6 million, dropping by 480,000 from 2014. The average number of employed persons during the first quarter of 2020 then continued to drop to 37.4 million, declining 0.8 per cent year-on-year while representing a fourth consecutive quarter decline.
As for unemployed persons, that number has increased to 396,000 people, up 14.8 per cent year-on-year during the first quarter of 2020. The average number of social security insurers that were unemployed as of the first quarter of 2020 was also up by 4.5 per cent year-on-year to 160,000 people.
With the outbreak, the slowdown in global economy and the ongoing drought, the Thai labor force is even more vulnerable. Workers that are most at risk at the moment are the ones working in tourism-related industries, such as hotels, restaurants, entertainment, and wholesale and retail businesses.
Similarly, workers in the agricultural sector will be directly hindered by the drought and indirectly hampered by declining purchasing power. This means that the agricultural sector may not be able to absorb unemployment from other troubled sectors as they have done in the past.
For instance, taxi drivers in Bangkok who are having a hard time finding passengers during the lockdown cannot go back to their hometowns to grow rice for food or income.
Farmers, part-time workers, freelancers, small and midsized enterprise (SME) employees, and those who are self-employed, which account for 23.4 million or 62.2 per cent of total employment, are also badly hit. They are usually most sensitive to economic conditions and have comparatively higher risks as they are the first ones to be let go when things turn sour.
Therefore, as it’s unlikely these people will be returning to their jobs anytime soon, especially those working in the tourism sector, the EIC is expecting to see the worst unemployment rate on record in 2020.
EIC said that if the situation is prolonged to the second half of 2020 or later, the unemployment rate could exceed the projected rate of 8-13 per cent. However, the labour market situation should improve after the lockdown measures are eased but at a very slow rate following the expected U-shaped economic recovery.
Regionally
S&P Global Ratings said on Monday that Asia Pacific’s unemployment rates could surge to” well over” 3 per cent in 2020 or more than twice as much as the average recession. They said that social-distancing measures is killing job creation in the region.
“Surging unemployment in Asia-Pacific would mean a shallower recovery once the pandemic is contained and, in some economies, credit stress for leveraged households,” said Shaun Roache, Asia-Pacific chief economist at the ratings firm. “Historical data show that jobs lost are not easily won back.”
They explained that the service sector, which is most at risk from the outbreak, is also the most important employer across the region and a bigger engine of jobs growth than factories. For example, out of every 100 workers in Asia Pacific, 55 work in services while 22 work in wholesale and retail trade or hospitality. Just 14 work in the entire industrial sector.
SMEs have also created many of these new service sector jobs. For example, firms with fewer than 250 employees account for almost 70 per cent of all jobs in Australia, Japan, Korea, and New Zealand.
With fewer resources, access to finance becomes even more challenging as lenders are more wary of the outlook. SMEs will look to cut cost and wages are usually their largest expense. At the same time, people who manage to hold on to their job will have lower hours and in turn, lower income as well.
S&P now estimated that around a 7.5 percent hit to growth will cause unemployment rates to rise by as much as 4 per cent, with the biggest effects in Australia and Korea. Their study also shows that sharp spikes in unemployment tend to only repair themselves in slow drifts.
Moreover, given the special circumstances of the pandemic, the repair could be even longer than usual.
“The rise in unemployment could be larger now than in previous cycles because the downturn is much larger and is concentrated in the services sector,” Roache said.
Job losses will hit households’ debt-servicing capacity, encourage higher saving and lower consumption. Australia, Korea, Malaysia, and Thailand appear most exposed, they added.
