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Published on January 16, 2008

In that worst-case scenario, export value would be only Bt169.7 billion this year.

The Commerce Ministry's export target is 12.5 per cent.

Aat Pisanwanich, director of UTCC's International Trade Studies Centre, yesterday said the baht would continue appreciating to a 10-year high of 32.50 to the dollar in the first half of the year, due to the weakening greenback and a lack of a concrete policy for alleviating the problem.

In the worst-case scenario, the baht would peak at 32.50 while the Dubai oil price climbed to US$97 (Bt3,200) per barrel and the US economy expanded only 1.5 per cent, down from 2.2 per cent last year.

"Thailand's export value would drop 0.37 per cent for the appreciation of every baht against the dollar," he said.

To increase exports, Aat suggested the government impose new measures to control the baht's rise. He said the currency-control policy was no longer efficient in tackling money speculation, but interest rates could not be cut, due to rising prices of consumer goods.

Another risk to the export sector is the worldwide economic slowdown. Global economic growth is targeted at 3.3 per cent, down from 3.6 per cent last year.

However, UTCC is confident the worst-case scenario will not happen. It believes export value could grow 12.78 per cent this year, because the baht will likely average 33.50 per dollar while the Dubai oil price stays at $87.20 per barrel and the US economy grows 1.9 per cent this year.

If exports grow 12.7 per cent, imports should grow by 14.85 per cent to $161.9 billion, up from 9.49 per cent last year. The trade deficit would decrease to $10.89 billion and the current-account deficit would be $13.43 billion.

In the study's best-case scenario, export value would grow 14.72 per cent. This is based on the baht at 34.50 against the greenback, a Dubai oil price of $77 per barrel and the US economy growing 2.2 per cent.

Chainant Ukosakul, vice chairman of a Thai Chamber of Commerce committee on trade rules and international trade, said the baht had appreciated to the second-highest value against the dollar in Asia, behind only the Philippines. The problem has lowered export competitiveness.

From 40.76 to the dollar in 2006, the baht strengthened 18.55 per cent to 33.20 last Wednesday. It was up 8.29 per cent year on year, while regional competitors like China, Malaysia and Singapore have seen their currencies strengthen at a lower rate. Vietnam's dong and Indonesia's rupiah have even weakened 2.46 per cent and 4.81 per cent, respectively, against the dollar.

Chainant urged the government to solve the problem rather than call for exporters to stop selling dollars. He said most exporters were small and medium-sized enterprises that lacked the efficiency to hold the dollar on hand if they found the baht was likely to be stronger.

The government should also set up an export fund to alleviate problems for exporters, he added.

Petchanet Pratruangkrai

The Nation