Exporters worry strong baht will mar good year

Barclays Capital research shows the Bank of Thailand may let the baht strenghten to 31.50 per dollar this year thanks to the export recovery. The investment bank expects the baht to move toward 32 in the next six months and to 31.50 by the end of the year.

The Commerce Ministry yesterday reported that exports shrank by 14.2 per cent to $152.5 billion last year, while imports were down by 25.3 per cent to $133.79 billion, leaving the highest trade surplus in the country's history.

Exports in December alone rose by 26.1 per cent year on year, the biggest jump in a year, to $14.62 billion due to clear signs of economic recovery.

Imports in the month improved 28.2 per cent to $14.42 billion, resulting in a trade surplus of $202.4 million.

Commerce Minister Porntiva Nakasai said exports this year are expected to keep growing, propelled by the global economic recovery and free-trade agreements, particularly for Asean countries.

Exports among Asean and its partners under FTAs account for more than 40 per cent of their exports. The pacts should increase export opportunities after full implementation this year, she said.

"However, the baht's strengthening would be a negative factor affecting export growth this year, which is expected at 10-15 per cent," she said.

A senior commercial source said the baht would normally appreciate when the country posts high trade surpluses, as that shows the country has strong economic fundamentals.

Pornsilp Patcharintanakul, deputy secretary-general of the Board of Trade of Thailand and the Thai Chamber of Commerce, said exporters had to worry about the baht's rising value this year following high trade surpluses.

"The baht is expected to gradually increase to 32-32.5 against the dollar. Exporters, especially those of agricultural goods and foods, which use high local content, will suffer the most," he said.

Although export volume will not drop this year, income and profit will be lower due to the baht's appreciation.

To ensure export competitiveness as the baht firms up, exporters should not take risks on the exchange rate. They should accept a lower return by quoting prices based on the exchange rate, rather than speculate on the currency, he said.

Some exporters may change their contracts to other currencies in order to protect themselves from the baht's gain against the softening US dollar, he added.

Srirat Rastapana, director-general of the Department of Export Promotion, said exports last month were robust in all categories.

Agro-industrial and industrial exports showed markedly higher performances of 42.1 per cent and 18.6 per cent, respectively.

Exports to every market, except Brunei, which dropped by 5.9 per cent, also grew substantially last month, reflecting high demand for consumption and clearer economic recovery.

Exports to major markets, in particular the five main Asean countries, surged by 43.1 per cent. Exports to the United States were up by 13.3 per cent, to the European Union by 11.3 per cent and to Japan by 10.3 per cent.

Exports to new markets also increased, including by 47.1 per cent to Indochina, 16.3 per cent to the Middle East, 30.5 per cent to Africa, 33.9 per cent to Latin America, 55.1 per cent to Eastern Europe, 37.6 per cent to India and 117.6 per cent to China.