Thailand's cabinet met today to discuss the mounting economic cost of floods that have killed 315 people, and residents of Bangkok were told not to drop their guard even if the immediate danger to the capital had passed.
Thai finance minister Thirachai Phuvanatnaranubala has said the damage from flooding since July could be as high as 1.7 per cent of gross domestic product (GDP) and ministers will discuss relief measures and extra government borrowing to pay for it.
The country’s prime minister Yingluck Shinawatra said yesterday spending on reconstruction could amount to more than 100 billion baht (€2.3 billion) after the worst floods in half a century damaged large areas of farmland and closed huge industrial estates.
The cabinet was to discuss a proposal to raise the budget deficit by 14 per cent to 400 billion baht (€9.4 billion) for this fiscal year from October 1st. The cost could go far higher if Bangkok, which accounts for 41 per cent of GDP, is hit by floods.
Monsoon rain, high tides and water flowing down from reservoirs in northern Thailand had threatened the capital at the weekend but its defensive system of dikes and canals held.
However, Bangkok’s governor Sukhumbhand Paribatra warned the danger was not completely over and that districts in the north of the capital may still face problems over the next 48 hours.
"We don't want to cause any panic among Bangkokians," he told a news conference late yesterday. "However, if you want to move valuables or electrical equipment to higher ground for safety reasons, that would be good."
Residents have complained about contradictory noises from city and government officials, including an evacuation warning in a northern suburb last week that proved to be a false alarm.
There have been conflicting signals over the fate of the Nava Nakorn industrial estate north of Bangkok, which has 270 plants and about 270,000 workers, but the government told firms to halt operations on Monday as floodwater breached its walls.
At least six big estates have now closed, most of them in the central province of Ayutthaya.
The government is pushing ahead with a big increase in the minimum wage despite the huge bill companies face to restart their operations once the waters subside. Ms Shinawatra’s Puea Thai Party had promised a minimum of 300 baht (€7) a day in its campaign for the July election that swept her to power, a commitment industry said would be ruinous and economists said would fuel inflation.
Government, employer and worker representatives came up with a compromise yesterday, agreeing to a big 40 per cent rise that will still leave the minimum below 300 baht in most provinces, including Ayutthaya. The rise has also been pushed back to next April from January because of the flooding.
The 300 baht minimum will apply in Bangkok and six other well-off provinces, including the tourist island of Phuket. That wage is five times higher than the minimum in Vietnam and 2.5 - 4.6 times that in Indonesia, according to Kasikorn Research Center. A rice-based meal costs about 37 baht (€0.9) from a Bangkok street-vendor.
The wage rise will add to the central bank's dilemma at its rate review tomorrow. Core inflation is near three per cent, the top of its target range, but the economy is under threat from both the floods and a slowdown in Western export markets.
The consensus view is that the Bank of Thailand will hold the policy rate at 3.5 per cent. It has almost tripled in the past 15 months.
"Before the floods, our economy was growing close to its potential. We have to look at how far monetary policy can be flexible," said bank governor Prasarn Trairatvorakul yesterday after a meeting between officials and business leaders.
Reuters