Factors align for surge in exports

Economy May 23, 2018 01:00


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ECONOMIC researchers are rewriting their forecasts for the performance of the export sector, flagging growth of as high as 8.9 per cent this year on the back of global economic expansion.

The optimism is shared at research units across state and private organisations and is also based on the strong demand for Thai products and the rising prices in oil-related commodities. The low end of the forecasts is for an increase in the value of shipments of 7.5 per cent.

TMB Analytics’ growth forecast sits at the high end of the range, at 8.6 per cent citing the higher prices for agricultural products and oil-related products and the sustained expansion in the economies of Thailand’s trading partners.

Given the higher global demand for products in light of the world's impressive economic growth in 2018, Siam Commercial Bank's Economic Intelligence Centre (EIC) forecasts exports to expand 7.5 per cent this year. It also pointed to the higher prices of oil-related products as a result of expected continued rises in crude prices,

Kasikorn Research Centre is looking at export expansion of 8 per cent this year, highlighting the growth in global trade.

On Monday, the National Economic and Social Development Board forecast an 8.9 per cent in exports for 2018, drawing encouragement from the economic growth of 4.8 per cent recorded for the first quarter from the year-earlier period – the highest mark in five years.

However, the Ministry of Commerce is sticking with its estimate of 8 per cent growth in exports.

The value of shipments jumped 12.3 per cent year on year in April – extending a winning streak to 14 months - to US$18.95 billion.

The performance was led by oil-related products such as finished oil, chemicals and plastic products. For the month, imports advanced 20.4 per cent year on year to US$20.23 billion. As a result, Thailand's trade was in a deficit of $1.28 billion.

In the first four months of this year, exports climbed 11.5 per cent year on year to $81.77 billion, at a monthly average of $20.44 billion.

The result reflected the higher product prices following the rises in crude prices and the global economic expansion. The four-month imports tally jumped 17.2 per cent to $81.10 billion. The country incurred a trade surplus of $673 million.

TMB Analytics forecasts that while exports will continue to rise, they will do so at a slower rate for the remaining eight months of this year - due to the statistical effect of high base of comparison

Based on a study by the research house, every 1 per cent change in crude price will prompt changes in the prices of exported agricultural products and oil-related commodities in the same direction by 0.11 per cent.

TMB Analytics expects the global crude price to increase 30 per cent year on year to US$71 per barrel for the rest of this year. The EIC predicts the Brent crude oil price will rise 28 per cent year on year to US$70 per barrel in 2018.

As a result, prices of exported agricultural products, rubber, chemical products, finished oil and steel – accounting for a quarter of Thai exports - will likely rise, TMB Analytics said.

Exports could improve in light of the estimated expansion in the global economy and import, led by the United States, the euro-zone countries, the Asean-5 states and CLMV countries (Cambodia, Laos, Myanmar and Vietnam), the research house said.

According to the International Monetary Fund (IMF), global economy is forecast to grow 3.9 per cent this year compared with last year's 3.7 per cent, while global imports are estimated to rise 5.7 per cent compared with the 5.5 per cent growth last year.

However, risks remain to exports in the form of US-China trade conflicts and the baht’s strength.

Even though a trade war between the top two economies would have a relatively short-term impact on Thai trade, this warranted monitoring for its impact in the medium to long term, TMB Analytics said.

The Thai currency’s appreciation would likely continue, it said. The baht is predicted to appreciate by 3.5 per cent from the current level to 31 to the US dollar by the end of the year. The increase would factor in the improved Thai economic fundamentals on the back of income from exports and tourism as well as foreign direct investment.

The EIC forecasts imports will increase 12.2 per cent this year, due to the expected higher demand for raw materials and capital goods. Such demand would be in line with the expected recovery in public and private investment and likely higher fuel prices.