Global economic slowdown and strong baht hit Thai exports

Economy July 27, 2013 00:00

By Petchanet Pratruangkrai,

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The Commerce Ministry has announced it may downgrade the target for Thailand's export growth this year by up to 6.5 per cent from its previous target of 7-7.5 per cent, after shipments in the first half grew by only 0.95 per cent year on year.

The ministry said the changes were due mainly to the global economic slowdown and China’s slower-than-expected economic growth.To counter the decline, the ministry said it would launch a number of measures next month to strengthen and promote Thai exports for the remainder of the year, which would focus on new markets and increasing export value.
According to the ministry, Thai exports in the first half of this year were valued at US$113.3 billion (Bt3.52 trillion), an increase of only 0.95 per cent. In baht terms, exports declined by 3.72 per cent to Bt3.33 trillion.
“Thai shipments have grown at a slower pace than expected because of the slowing of the global economy, in particular China’s economic slowdown. This has created both a direct and indirect impact on Thai exports. The ministry therefore needs to monitor global economic growth closely, as Thai shipments could be further hit,” permanent secretary Vatchari Vimooktayon said yesterday.
She said the ministry would lower its export-growth target this year from its previous estimate of 7-7.5 per cent, with a projected worth of between Bt245.54 billion to Bt246.73 billion in the third quarter.
The International Trade Promotion Department said it also planned to promote exports in the current second half of the year. In June, shipments dropped for the second consecutive month by 3.38 per cent to $19.09 billion (Bt564.16 billion or a decline of 3.38 per cent in baht terms).
Srirat Rastapana, director-general of the department, said shipments had been affected by a sluggish global economy. In addition to the effects on the Thai economy of the economic slowdown in China, the strength of the baht was a factor that had resulted in a negative return for exports to date, he added.
If the baht remains stable, it could result in a more positive return for exports during the rest of the year. However, if the baht appreciates to Bt28.5 against the US dollar, Thai shipments would be hit hard, Srirat said.
Last month, the average value of the baht was 29.54 against the dollar, an appreciation of 5.27 per cent since June, when it was 31.18 to the dollar.
Overseas Thai trade counsellors are forecasting that Thai shipments will grow by 6.5 per cent this year, Srirat added.
The Office of Industrial Economics has lowered its forecast for growth in gross domestic product from its current 5-6 per cent to between 3 and 4 per cent, the agency’s director Somchai Harnhirun said yesterday. The forecast expansion of the Industrial Production Index has also been adjusted down from the current 3.5-4.5 per cent, to 0.5-1 per cent.
He said the forecasts were based on an assumption that Dubai crude oil is priced at $100-$110 a barrel throughout the year and the baht is valued at 30-31 per US dollar.
Exports to major markets declined 0.6 per cent in the first half of this year. Those to the European Union (15 countries) grew 1.4 per cent, while US-bound exports declined 0.5 per cent and those to Japan dropped by 2.5 per cent. Shipments to China fell last month by 16.7 per cent and by 3.6 per cent in the first half of the year, while shipments to Asean grew 5.5 per cent last month and 4.1 per cent in the first half of the year.
Asean markets were hit by a declining demand from their trade partners outside the region – particularly China.
Exports of many agriculture products also shrank last month, especially shrimp and chicken, as supply slumped. Shrimp exports in June fell by 45.6 per cent, while shipments of chicken declined 13 per cent year on year.
Imports in June grew 3 per cent to $21.01 billion year on year.