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Consensus on growth in 2014 exports, but risks remain

As everyone points out, exports will (it's hoped) be the accidental hero for the economy in 2014. The seemingly strong consensus in analysts on export performance stems from two sources: first, the shared global economic view, driven primarily by the stronger-than-expected recovery in advanced economies; and second, a more serious one - we just lack good news on other economic engines in the economy to drive growth this year.

Last year also started with much optimism all around. Consumption should have been great, and exports should have been strong. The conclusion at the end of the year revealed a completely opposite direction, and what was left of the optimism at the beginning of the year was nothing more than the continual downward revisions of projections throughout the year.

So how can we be sure that this year will be different? Well, we can't. Thai exports still walk on a path of high uncertainty.

Global recovery remains in a fragile state. Most bets this year are on the US-led recovery. But even the US job-market figures such as the non-farm payrolls, highly revered as the most solid indicator of recovery, started the year flip-flopping in direction, undershooting both consensus forecasts and average past performance for two consecutive months, while unemployment claims are averaging higher than expected. While it remains true that the US unemployment rate edged surprisingly lower to 6.6 per cent against all these indicators, the new Federal Reserve chairwoman Janet Yellen recently admitted that more assessment would be necessary. Recent figures on retail sales and manufacturing were also not comforting.

Though the historically harsh winter in parts of the United States was blamed for the poor performance in these economic indicators, no one knows for sure, so it can go either way.

Among other advanced economies, Europe appears much more stable this year. Germany and France are leading the pick-up in the euro zone, albeit at a modest pace. The 18-nation economy is still operating far below potential with little passthrough of the recovery to improve the job market, which is needed to strengthen domestic consumption. The British economy on the other hand has beat expectations in terms of recovery. Housing recovery and stronger consumer spending have led the expansion, with continual improvement in the labour market, despite the damage from flooding in the economic heartland of England.

In Asia, the Japanese economy is still waiting for Prime Minister Shinzo Abe's third arrow to take effect. Even though the economy has been riding on fiscal and monetary stimuli since last year, their effectiveness will fall over time, creating more fiscal holes if the economy doesn't soon stand on its own feet. And then there is the sticky issue of increases in consumption taxes, which have unseated many of Abe's predecessors. Hence the Japanese outlook is better, but not yet stable.

The Chinese economy is still battered by Beijing's struggle to tame shadow banks and local-government debts, which unfortunately significantly slowed down its domestic economy. China's exports and imports, nonetheless, are churning faster at the beginning of this year.

This means there are a lot of pluses for the Thai export outlook, but minuses are also there. Overall, it still does not look like a glorious year for Thai exports, and things are not yet that easy for exporters. Nonetheless, growth from export sectors is likely to be needed because domestic sectors are severely lagging behind. Unfortunately, with the government now in limbo on what it can and cannot do, the private sector may have to take it upon itself to plan and execute whatever can be done to support exports.

TMB Bank's projection of export growth this year is 4.5 per cent, better than the 0.3-per-cent contraction observed last year. But there is a lesson to be learned from our poor performance in 2013. Despite our cries about a poor global recovery and how that put a ding on our export growth, other economies in the region saw their export-growth numbers in the green. For example, Vietnamese export expanded 16.5 per cent last year, and Chinese export grew just fine at 7.8 per cent. So if anything, it seems that Thai exports were weighed down by Thai-specific factors, something we should tackle before we miss another train. This will be the area we must tackle even in absence of a functioning government.

We re-emphasise that any upbeat export outlook must be viewed with caution. For now, we should view Thai export performance this year not with a bullish sentiment, but with a need-to-grow basis.

Next time, we will highlight some areas of focus really to get our export engines going again, both for short- and long run growth. After all, exports got us out of two economic crises. Let's help exports to get us out of this one.

Dr Benjarong Suwankiri, head of TMB Analytics, the economic analysis unit of TMB Bank, can be reached at tmbanalytics@tmbbank.com. Views expressed in this article are those of the author and not of TMB Bank or its executives.


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