Contracting export sector needs to find new markets, says ttb analytics report
Thailand's economy will maintain its growth this year due to a strong rebound in the tourism sector, but weakness in the export sector could stifle the positive momentum and dampen the overall economic outlook, ttb analytics at TMB Thanachart Bank warned on Tuesday.
Policymakers, manufacturers, and exporters must look to alternative markets, such as India and the Middle East, rather than relying on slowing demand from the United States, Europe, and China, Naris Sathapholdeja, deputy chief head of ttb analytics, said at a press conference.
According to a ttb analytics report, Thailand's economic growth this year could reach 3.4% due to the return of Chinese visitors, which will bring the total number of foreign tourists to 29.5 million this year. The strong recovery of the tourism industry boosts Thai confidence and raises overall demand for domestic consumption.
Unfortunately, there is a chance that the promising growth will be reversed due to the negative outlook in the export sector.
Naris explained that the export sector is still the main engine driving Thailand's economy, accounting for approximately 60% of the country's total gross domestic product (GDP), while tourism accounts for approximately 12% of GDP.
As a result, even a minor drop in export confidence can dampen Thailand's overall growth prospects.
He said that the 3.4% projection is based on a contraction of 0.5% in exports. However, if exports contract 3.0%, the country's overall growth could fall to 1.9% this year, despite the presence of 29.5 million foreign visitors.
Besides, while the International Monetary Fund raised its global growth forecast for this year from 2.7% to 2.9%, uncertainty, high inflation, and central bank rate hikes will have a negative impact on Thailand's major export markets like the United States, Europe, and China.
He advised finding alternative markets to trade with in order to boost the country's exports. The Asean region, India, the Middle East, and some African countries may be worth considering.
Meanwhile, he urged Thai exporters to trade with their partners in the local currency rather than dollars to avoid currency fluctuations.
Nares also expected the government to implement specific measures to reduce the cost of living for low-income households and vulnerable small businesses, as well as financial and credit measures from financial institutions to help vulnerable debtors on a case-by-case basis.
He said there was no cause for concern over the turmoil in US regional banks and Credit Suisse, because the problem is one of management, not the banking system. Thailand's banking systems are unaffected, he assured.
Besides, with large reserves, high liquidity, and relatively low non-performing loans, Thai banks can easily avoid the worst-case scenario.
His remarks came a day after the Bank of Thailand issued a statement assuring that the impact of the banking collapse in the United States and Europe on Thailand would be minimal due to the banking and financial sector's low level of transaction and investment exposure.
The BOT emphasised Thai banking's fundamental strengths. According to the 2022 report, Thai banks’ capital to risk assets ratio is 9.4%, which is higher than the minimum requirement of 8.5%, with the majority of the capital being Common Equity Tier 1 capital.
Naris said the current political vacuum may slow the economy down, due to delays in the government's disbursements and procurement process. Meanwhile, the situation may cause the private sector to reduce its investment.
However, the private sector and consumer demand and consumption can continue. As a result, there should be no political concern about Thailand's economy.
