Thai exports staring at grim prospects in 2023 global economic scenario

The grim picture for Thai exports was forecast by the Thai National Shippers’ Council (TNSC), the Thai Chamber of Commerce, and bankers from CIMB Thai Bank, TMBThanachart Bank (TTB) and Krungthai Compass.

During the Covid-19 pandemic, when tourism came to a standstill, exports were the main saviour of Thailand’s economy, with continued growth from 2020 until the third quarter of 2022.

However, signs of a slowdown became visible in October last year when exports contracted 4.4% year on year while the contraction widened to 6% in November.

TNSC chief Chaicharn Charoensuk said export data for December has not been announced yet but the TNSC expected it to be negative because of the impact from the global economic slump.

Chaicharn said the TNSC expected Thai export growth this year to slow slow down to 1-3% because of several factors:

● High inflation rates would prompt the US Federal Reserve and central banks of major economies to use austere financial measures that would cause their economies to slow down, affecting Thai exports.

● The Covid-19 situation in China has not improved and the Chinese government may be prompted to use restrictive measures, which would affect supply chains of Thai exporters, and cause economic slowdown in China, unavoidably affecting Thai exporters.

● Although the Russia-Ukraine war would benefit Thai exporters of foods, it would raise costs for exporters of other products when global oil prices rise.

● The baht has appreciated against the US dollar and its value increased from 38 baht per dollar two months ago to about 33-34 baht. This would cause Thai products to become less competitive.

The TNSC expects Thailand to export goods worth US$49 billion to the United States, while exports to China would be worth US$36.5 billion and US$49 billion to Europe this year.

Chaicharn said the TNSC wants Thai exporters to look for new markets to offset the decline in demand in some markets.

He said the key alternative markets for Thai exporters are:

Middle East: The TNSC sees Saudi Arabia, the United Arab Emirates and Qatar as capable of becoming important alternative markets for Thai exporters. Key export products to these markets could be rice and foods.

South Asia: Thai exporters can seek to export jewellery, accessories, plastic pellets and chemical products to India, Bangladesh and Nepal.

CLMV: Cambodia, Laos, Myanmar and Vietnam could be important alternative markets for Thai exporters with construction materials, electric appliances, plastic pellets, textiles and clothes, sugar, and machines and parts among key products.

Wisit LImluacha, deputy chairman of the Thai Chamber of Commerce, said the chamber expected export growth of 6% last year but only 2% this year.

He said the economic slowdown in some of Thailand’s major markets, especially the United States, Europe and China, would result in slowdown for exports.

The global economic slowdown, the high inflation rate and the sluggish performance of the manufacturing sector in Thailand’s main markets would remain risk factors this year, he added.

Amornthep Chawala, vice president of CIMB Thai, said the research office of his bank expected exports to suffer 1% negative growth this year. He said the prediction was based on the export situation in the last quarter of last year.

Amornthep said the negative growth could be more severe than one per cent if China faced economic sanctions from the US.

He said the reopening of China would benefit Thailand’s exports in the short term but the situation would reverse if China itself cannot export to the US.

“So, we estimate that the negative growth may be more than 1%. We have to wait and see the export data for two months before we can be sure,” Amornthep said.

He said the government should find new markets for Thai exporters and should ink more free trade agreements with other countries or groups.

Narit Sathapoldecha, head of the TTB Analytics centre, said his bank expected Thailand’s exports to grow at or lesser than 1.6% this year.

He said the main risk factor for Thai exporters is China itself. He said China’s economy could slow down because of the impact of the Covid-19 pandemic and Beijing could try to offset the situation by expanding its own exports, which could be at the cost of Thailand’s exports.

Narit explained that China might dump its products in the global markets and make it more difficult for Thai exporters to sell their products.

Pacharapoj Nantramas, vice president of Krungthai Compass, a research arm of Krung Thai Bank, said his bank foresaw export growth this year at 1.2% or lower.

The grim prediction was based on negative growth during the past several months, he added.