Thai exports saw an unexpected 5.7 per cent slump year on year in January, pointing to impact from the baht’s appreciation, the Thai National Shippers’ Council (TNSC) said, while urging exporters to use local currencies to reduce financing costs and foreign exchange risks.
The council also urged the next government to speed up trade negotiations to boost exports.
Council chairman Ghanyapad Tantipipatpong said that though Thai exporters were surprised by the results in January, they understood that it was difficult to control negative factors.
The appreciation of the baht is not a result of local factors but the impact from the volatile US dollar, she said. If the baht appreciates by Bt1 against the US dollar, income from exports will be lower by 3 per cent.
The council urged the Bank of Thailand to ensure that exchange rates were in line with that of Thailand’s trading partners, she said.
Exports in January fell 5.7 per cent year on year to US$18.99 billion, led by a 2.9 per cent drop in agro-industry and agricultural products and a 5.9 per cent fall in manufacturing products.
Thai shipments to China saw a relatively larger decline, stemming from the US-China trade war, while shipments to the United States increased 8.27 per cent, led by a 34 per cent surge in the automobile industry.
Shipments to Asean overall decreased 7.42 per cent, but shipments to CLMV countries (Cambodia, Laos, Myanmar and Vietnam) inched up 0.6 per cent.
Despite the export contraction in January, the council said it would maintain this year’s target of 5 per cent export growth, Ghanyapad said. The export growth estimate is based on the baht trading at 33 to the US dollar.
However, risks to Thai exports remain due to global trade uncertainties from the US-China trade war, Britain’s impending exit from the European Union to escalating tensions between India and Pakistan, which have caused short-term impacts to Thai exports and air transport.
Importantly, the baht’s appreciation has affected the price competitiveness of Thai exporters, particularly those who use local content.
The council encouraged Thai exporters to use local currencies like China’s yuan, Malaysia’s ringgit, Indonesia’s rupiah and Japan’s yen for their transactions to reduce financing costs and forex risks, Ghanyapad said.
Kasikorn Research Centre (KResearch) expects the baht to move with volatility amid Thailand’s trade and political developments, the Federal Open Market Committee’s meeting on March 19-20 and the March 27 trade negotiations between the US and Chinese presidents, which need close monitoring.
The baht began depreciating in late February to early March after appreciating to a five-year high of 31.07 to the US dollar. The Thai currency weakened to close at Bt31.90 per US dollar yesterday morning before moving in a range of 31.80-31.85 per US dollar in afternoon trading.
Ghanyapad urged that delayed negotiations on free trade agreements (FTAs) with Thailand’s major trading partners, including the European Union, may need to be speeded up for finalisation by the next government as FTAs are important tools to help support Thai exporters sell products to these countries.