Exports from Thailand decreased in the first half of 2019. Compared to the same period in the previous year, exports declined by 2.91 per cent.
Deputy PM Somkid Jatusripitak says, “Export trends are aligned with global sentiment and the outlook for other Asian countries, making export prospects murky because of the escalating trade war.”
The government has revised its export growth target down to 3% for the whole year, less than 5% compared to an earlier growth estimate.
Strong Thai Baht and U.S.-China trade war continue to weigh on exports
The strong Thai Baht is one reason for Thailand’s recent export weakness. Since January, the Baht has gained 5.5% against the U.S. dollar and it now stands at 30-31 Baht per dollar. Thai exporters believe the ideal Baht value against the U.S. dollar should be around 34.
The U.S.-China trade war has also taken a heavy toll on shipments, particularly of electronics, automobiles, garments, rubber, and plastics. Most of these exports are part of China’s supply chain targeted for export to the U.S.
Therefore, in 2019, Thai exporters are increasingly looking at other markets and try to ramp up export volumes. Particularly Japan, Cambodia, Vietnam, Laos, and Myanmar could help cushion the impact of the ongoing trade war.
Moreover, the export focus will shift to other products such as food, construction, furniture, and garment, which are not closely linked to the Chinese market.
Imports declining as less raw materials needed for export-related manufacturing
Imports decreased as well in the first half of 2019, despite the stronger Thai Baht.
The decline in imports is strongly associated with shrinking exports, as less raw materials were needed for export-related manufacturing. Moreover, the imports of export-related capital goods declined, including imports of aircraft, ships, floating structures, and telecommunication equipment.
On the other hand, imports in industries with strong domestic consumption growth have kept increasing. For instance, imports of vehicles and vehicle parts increased, as domestic car sales have picked up significantly.
Outlook: Export and import growth could recover in H2 2019
Thai export growth could recover in the second half of 2019, says SCB Bank’s Economic Intelligence Center. China has implemented economic stimulus measures that should increase demand for Thai products and a generally more bullish outlook for global demand could positively impact Thailand’s export sector, too.
The escalation of the U.S. tariffs on Chinese imports will lead to a redirection of international trade and global supply chains which will also impact Thailand’s economy. Both export and import industries will increasingly diversify away from China and seek opportunities in ASEAN markets.
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