Auramon Supthaweethum, DTN director general, was speaking at the “Thailand Economic Resilience and Opportunities” seminar on Monday. The seminar, held at Hyatt Regency Bangkok, was organised by The Nation.
Speaking on the topic, “Thailand Trade Pulse 2023: New Thinking to Cope with Multiple Headwinds”, Auramon said the global economy has been hit by several factors over the past three years, including the Covid-19 pandemic, geopolitical factors and climate change.
However, the National Economic and Social Development Council (NESDC) expects the Thai economy to grow by 2.7-3.7% this year compared to 2.6% last year, she said.
The economic forecast has improved thanks to a recovery in tourism, private consumption as well as government and private investment.
Yet, she said, the Commerce Ministry expects Thai exports to expand by just 1% this year compared to 5.5% last year, due to rising interest rates, geopolitical situations and global economic slowdown.
She added that Thai exports in the first half of this year came in at US$141.17 billion (4.91 trillion baht), down 5.4% year on year. However, she said, Thailand’s export market was still in a better condition than other countries like Japan, Malaysia, India, Indonesia and Vietnam.
“Thai exports are doing better than many other countries thanks to the demand for agricultural products, tourism growth, relief in raw material shortage and the weakening baht,” she added.
She expects Thai exports to recover gradually in the second half as many countries are still struggling to revive their economy, not to mention the Russia-Ukraine war and global warming.
“Relevant agencies in Thailand should work closely to help the country cope with these challenges,” she said.
Problems ahead
She said Thailand faces three key challenges in trade, namely geopolitics, sustainability measures and the Russia-Ukraine war.
On the geopolitics front, Auramon said Thailand is being hit because both the US and China have taken several protectionist steps to stimulate their economy.
For instance, the US is controlling the export of high-tech products to China, and is employing its Inflation Reduction Act to promote its domestic electric vehicle and batteries industries, she said.
China, meanwhile, has launched measures to strengthen its domestic market and reduce reliance on overseas markets. It has also launched the “Made in China” campaign to boost the production of semiconductors to support 70% of domestic demand by 2025.
These measures have caused supply chain polarisation, creating risks for Thailand as it has to carefully manage the supply chain, she said.
However, she added, Thailand can also gain from supply chain polarisation, especially from the United States’ Indo-Pacific Economic Framework for Prosperity and China's Belt and Road Initiative.
Windows of opportunity
With China’s market share in the US dropping, Thailand has been able to slide in to gain a greater market share, especially in products like air-conditioning, hard disk drives, electronics and auto parts, she said.
Thailand is also gaining from foreign factories moving out of China, especially those in the electrical and electronic appliances and auto parts industries, she said.
She advised Thailand to closely monitor supply chain polarisation to attract investments.
As for eco-friendly trade measures, she said many countries have imposed restrictions based on their carbon neutrality and net-zero emissions goals.
She said that though this trend may pose challenges for Thailand, it also matches the country’s policy and commitment to achieving sustainable development.
However, she said, both public and private sectors must cooperate to deal with changes, such as the reduction of greenhouse gas emissions, traceability and financial support.
For instance, she said, the European Union has launched 13 laws to work on sustainable development, especially the Carbon Border Adjustment Mechanism (CBAM), which aims to reduce inequality in greenhouse gas reduction.
This mechanism stipulates that importers of six product categories, namely aluminium, cement, iron and steel, electricity, hydrogen and fertilisers, must provide information on greenhouse gas emissions in the first three years, from October 1, 2023, to December 31, 2025, she explained.
From January 1, 2026, importers will be expected to have CBAM certification based on their emissions.
Apart from CBAM, she said the EU has also launched an EU Deforestation Free Regulation (EUDR), which went into effect on June 29.
The regulation aims to ensure that the production of cow (beef), cocoa, coffee, palm oil, rubber, soybean and wood are traceable in a bid to reduce deforestation.
“Even though Thailand does not export many of the abovementioned categories, the Commerce Ministry has cooperated with government and private agencies to ensure that Thai entrepreneurs can cope with these measures,” she said.
As for the Russia-Ukraine war, she said it has had an impact on the food and energy supply chain, as they are exporters of several products like fuel, natural gas, wheat, iron and steel.
“Thailand is not too badly affected by the Russia-Ukraine war thanks to the agreement on exporting grain via the Black Sea between Turkey, Russia and Ukraine,” she said.
"Thailand, however, should be cautious as Russia has withdrawn from the agreement causing difficulties in the supply chain in terms of global food production and manufacturing costs.”
Food security
She said the El Niño phenomenon must be monitored closely as many countries are taking steps to ensure food security. For instance, she said, India has suspended its export of rice to ensure there is enough for local consumption.
“Thailand can use this as an opportunity to boost exports to countries with high demand for food,” she said, adding that it can also help boost the price of Thai products.
She also advised Thailand to pay attention to developing innovative ways to tackle food shortage in the long term.
“Thailand has to adapt to changes and seek cooperation to maintain competitiveness,” she said.
She said that though the International Institute for Management Development (IMD) has ranked Thailand 30th globally for competitiveness, it should work towards boosting its competitiveness further.
New FTA negotiations
The Commerce Ministry is working on facilitating business, modernising law and regulations, maintaining old markets and penetrating new markets and boosting entrepreneurs’ potential, she said.
The ministry is also cooperating with many countries to maintain trade and investment benefits, she added.
Thailand is working on new free trade agreements with many countries, including the United Arab Emirates, Sri Lanka, EU, Asean and Canada, she said.
The ministry is also negotiating FTAs with the Southern Common Market (Mercosur) comprising Argentina, Brazil, Paraguay and Uruguay, and the Gulf Cooperation Council (GCC).
GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
She said negotiating free trade accords poses a lot of challenges, but Thailand should be able to adapt to changes in the global trade situation and overcome them.