NESDC warns Thai exporters to prepare for worst as China’s economy heads downward
The National Economic and Social Development Council (NESDC) is urging Thai businesses, especially exporters, to brace themselves for the effects of China’s economic slowdown.
The warning is in response to slower-than-expected growth in China, as its real-estate sector suffers severe debt and liquidity problems.
NESDC secretary-general Danucha Pichayanan said earlier this week that though it’s too early to tell how much China’s economy will affect Thailand, it is still worth being cautious.
He was speaking at the launch of Thailand’s economic outlook report for the second quarter.
“There is currently little information on whether or not this problem will eventually lead to an economic crisis. If China experiences an economic downturn, the global economy and the Thai economy will inevitably suffer. This is something that must be supported as well,” he said.
As per the NESDC report, Thailand’s export sector has been slowing down due to global recession and geopolitical uncertainty. As a country that relies heavily on exports, China’s slowdown, combined with the global recession, will undoubtedly reduce Thailand’s revenue from trade and tourism.
The report also showed that the Chinese economy grew 5.5% in the first six months of this year, the slowest in the last two years. Furthermore, China’s expansion remains unimpressive, with some factors limiting its recovery and growth.
Danucha highlighted four factors impeding China’s growth, namely slowing investment, particularly in the property sector, a drop in domestic consumption combined with a high unemployment rate among youth, strict restrictions on imports and exports from the West, and a severe high public debt of 51.5% of gross domestic product (GDP).
He added that China is also on the verge of deflation as food and fuel prices fall gradually. The drop in product prices reflects a risk that the Chinese economy will enter a state of deflation, especially if demand remains weak.
Danucha said domestic consumption in China is expanding at a low level, as reflected in retail trade value in July, which rose by 2.5%, down from 3.1% in the previous month.
However, he believes the Chinese economy will be supported by an accommodative monetary policy from the People’s Bank of China, which will boost liquidity in the economy in tandem with ongoing fiscal stimulus measures.
