Veerathai Santiprabhob, the governor of the Bank of Thailand (BOT)
Veerathai Santiprabhob, the governor of the Bank of Thailand (BOT)

Exports show resilience in face of escalating trade row

Economy June 22, 2018 01:00

By PRAPASRI OSATHANON
WICHIT CHAITRONG
THE NATION

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THE growth trajectory of exports held firm last month, with a robust 11.4 per cent gain from a year earlier, despite rising trade tensions between the United States and China.



Against the backdrop of an escalating row between the two economic superpowers, the chief of the Bank of Thailand (BOT) said the uncertainties presented risks and opportunities for Thai exporters. 

For the May trade figure, exports worth US$22.257 billion marked the 15th straight month of gains, the Ministry of Commerce’s Trade Policy and Strategy Office (TPSO) reported.

Imports grew 11.7 per cent year on year in the month to $21.053 billion. As a result, Thailand achieved a trade surplus of $1.204 billion.

For the first five months of this year, exports increased 11.6 per cent to $104.032 billion and imports advanced 16.6 per cent to $102.155 billion. For the period, the country’s trade was in a surplus of $1.877 billion.

Manufacturing shipments rose for a 15th straight month in May, led by automobiles and parts, computers, plastic pellets, chemicals and oil products.

For the month, agricultural and agro-industry shipments edged up 1.5 per cent, led by rice, frozen and processed chicken and canned tuna.

For this year, the value of exports is expected to come in close to the target rate of 8 per cent growth. The optimism is fuelled by increased distribution in new markets in line with an expansion of the global economy, despite the overhang of risk of fluctuations in shipments arising from the retaliatory trade measures exchanged between China and the US, the TPSO said.

The US economy has continued to expand and the country’s low unemployment rate could boost Americans’ spending, while the euro zone countries are expected to see satisfactory growth, particularly in the labour market, the office said.

China is expected to enjoy sustained economic expansion, driven by domestic consumption and high export growth - particularly in automobiles and electronics products - and this could benefit Thailand with its role in the Chinese supply chains, it said.

Similarly, Japan’s exports of technology-related products continued to expand, which could also help support Thai exports, the TPSO said.

The global crude price is estimated to drop slightly as markets expect oil producers to raise oil production capacity in response to lower oil supplies and the contribution from US producers is expected to rise, the TPSO said.

Meanwhile, demand for oil continues to grow in line with the global economic expansion, which could drive up crude oil prices in the long term. Prices of agricultural products and oil-related products are expected to follow suit, it said.

On the trade row front, Veerathai Santiprabhob, the governor of the Bank of Thailand (BOT), yesterday expressed his concerns over the impact of the China-US dispute on Thai exports and investment, given both countries threats to launch retaliatory actions against each other in the form of high tariffs on imports. 

The trade policy of large countries such as the United States could have a significant impact on the Thai economy, he said on the sidelines of the National Directors Conference 2018 hosted by the Thai Institute of Directors (IOD).

Increased tariffs on imports could distort the market and have an impact on Thailand, even though the country has not been targeted by the US government, he said. 

Manufacturers based in Thailand also export intermediate electronics goods to China for assembly before being exported to the US market.

A trade war could disrupt global production chains and harm investor confidence and this would hurt private investment, Veerathai warned. 

However, he said there may be also be opportunities for some manufacturers that could produce substitute goods and export them to the US, in the event of the US following through with its announcements of higher taxes on Chinese goods. 

As for currencies, Veerathai said that the baht has weakened, but not by much when compared with the currencies of other emerging markets.

The currencies of some countries in Latin America have dropped sharply, in the range of 15-30 per cent, he pointed out. “The baht cannot go against market forces but the central bank can act to avoid large swings in its value,” Veerathai said.

The baht and other emerging market currencies were under pressure, amid the US Federal Reserve’s policy to increase its benchmark interest rate.

The baht was trading at 31.70 per to the US dollar at the beginning of May and had weakened to Bt32.7 on Wednesday, according to the BOT. In terms of technology, Bandid Nijathaworn, president and chief executive officer of the IOD, said Thai firms have to adapt themselves to the rapid changes in digital technology in order to compete successfully in the market. 

 Directors of companies and management teams have a key role in leading companies and they should put in place data analysis centres in order to monitor business conditions and ensure they can start the adaptation process, he said.