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1 Apr 2022

Econ Digest

Thai export opportunities in the Russia-Ukraine war


        KResearch has revised downward its forecast for Thai exports in 2022 from 4.3% to 3.4%, based on challenges of the Russo-Ukrainian conflict. Thai exports in 2022 are expected to be mainly driven by the prices of production factors related to oil and agricultural products and essential goods, such as plastic pellets, chemicals, rubber and rubber products, fruits and seafood. Exports to the European Union (excluding the United Kingdom) will have the lowest growth rate among Thailand’s major export markets. However, if negotiations between Russia and Ukraine reach an accord sooner than expected, it would help boost Thai exports by 3.7%. In addition, the spread of COVID-19 in China should be closely monitored and could be another factor affecting Thailand’s exports if the outbreak in China expands further.
        Sanctions by the U.S. and allies have led Russia to retaliate by banning exports of more than 200 key products until the end of 2022, some of which are mid-stream and downstream products, leading to potential stagnation and increased production costs for production that relies heavily on imports from Russia. If Western countries increase sanctions, Russia may ban exports of important minerals vital to production in many industries, such as iron ore, aluminum and nickel, especially the important palladium ore used in the automotive and electronics industries, as Russia is the world’s top exporter of palladium.
        The impact of the Russo-Ukrainian war on Thai exports needs to be closely monitored as follows: 1) The risk of the Russian and Ukrainian economies entering into a recession this year is increasing. Thailand is expected to lose around USD 600-800 million worth of exports to these two countries in 2022, accounting for 0.2-0.3% of Thailand’s total exports; 2) The risk of an economic slowdown in the U.S. and its allies due to inflation caused by supply constraints will affect demand for Thai luxury products, which account for one-third of Thailand’s exports to Europe. However, essential goods may still achieve growth; 3) Exacerbation of supply chain bottlenecks: Since Russia is one of the world’s leading producers in both upstream and midstream industries, countries within supply chains associated with Russia may face higher cost burdens or encounter raw material shortages. As a result, Thailand’s imports could surge in 2022, and Thailand could suffer a trade deficit for the first time in nine years.

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