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Thailand: Q1 exports anticipated to dip 3-5%
Exports are expected to contract 3-5% in the first quarter before starting to recover in the second and third quarters, partially helped by China’s reopening, lower freight rates and high global purchases, according to the national shipping group.
However, the group warned the strong baht may weaken the country’s export competitiveness, asking the Bank of Thailand to ensure the baht’s stability and interest rates are at appropriate levels.
“We forecast exports in the first quarter to contract 3-5% year-on-year, mainly because of the adverse impact of the global economic slowdown, before recovering to a 0.7% dip in the second quarter and posting gains of 1.8% and 9.8% in the third and the fourth quarters, respectively,” said Chaichan Chareonsuk, chairman of the Thai National Shippers’ Council (TNSC).
“For 2023, the TNSC remains bullish on exports, posting growth of 1-2% to US$291-292 billion.”
The Commerce Ministry reported on Jan 24 the customs-cleared value of exports dipped for the third month in a row in December, falling 14.6% year-on-year, leading to annual growth of 5.5% in 2022 to $287 billion.
According to Mr Chaichan, key stumbling blocks for exports include the anticipated delay in purchase orders by trading partners as they retain relatively high inventories as well as weakened export competitiveness because of high production costs, especially from power bills that caused entrepreneurs to pass on high costs to consumers.
More importantly, he said the baht’s appreciation will adversely affect the pricing and competitiveness of exports compared with competitors’ goods priced in weaker currencies, while global energy prices remain volatile in line with the international political situation.
Shippers want the baht to equal 34-35 per US dollar to help with trade competitiveness and be in line with regional currencies, said Mr Chaichan.
The Thai currency accelerated quickly to 32-33 per US dollar this year, compared with 35-36 in December last year.
According to the latest study by the Trade Policy and Strategy Office, high-value industrial products with few imported raw materials such as rubber products, canned and processed seafood, gems and jewellery are expected to be the hardest hit as the baht strengthens.
Although the extent of the impact of the baht’s appreciation on export performance is not on par with the effect of a weak global economy and economic slowdown in key trading partners, a strong baht directly affects the competitiveness of Thai products, making them more expensive than those of other exporting countries.
Export value is also subject to a reduction once converted from the US dollar, resulting in a decline in revenue or profits for exporters, according to the study.
However, the study found the baht’s gain positively affects imports, particularly of energy, capital goods, raw materials and semi-finished goods.
Semi-finished goods account for 83.8% of total imports and a more robust baht reduces the costs of such imported products to make finished products for re-export.
Source: https://www.bangkokpost.com/business/2501456/q1-exports-anticipated-to-dip-3-5-