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19 Feb 2010


International Trade, 2010: Strong Import Growth, More than USD6 Billion Trade Surplus (Business Brief NO.2765)

According to the Ministry of Commerce report on Thailand's international trade status in January 2010, the Kingdom's exports grew 30.8 percent YoY, while imports jumped to 44.8 percent YoY. Those figures represented the highest growth rates in 18 months due partly to a low base effect from last year. Our trade balance in January 2010 saw a surplus of USD515 million, increasing over the USD277 million recorded in December.
As for the outlook for the coming months, KASIKORN RESEARCH CENTER (KResearch) expects that the values of Thailand's exports and imports may decline slightly in February, because of the Chinese New Year – a major holiday period for businesses run by ethnic Chinese in most Asian countries. Nevertheless, both exports and imports will continue to exhibit double digit growth, especially imports that may grow 50 percent because of the low base effect early last year. As for the coming months, Thailand's exports and imports will show steady growth, albeit at a slower pace expected during 2H10 due largely to the high base effect of late 2009 with the clear recovery in Thailand's international trade seen in 2H09.
As for the 2010 outlook, KResearch expects that:
  • Thailand's exports will perform better than expected based on an assessment that many economies worldwide will exhibit higher growth than expected previously.
  • However, the global economy will continue to face many downside risks, including fear of a real estate bubble in China that has prompted the authorities to curb bank lending, thus likely causing the Chinese economy in 2010 to grow less than the 10 percent rate forecast by the International Monetary Fund (IMF). In addition, unprecedented budget deficits and public debt in many EU nations may inhibit economic recoveries within the Euro-zone. Because of this, KResearch expects that Thailand's exports in 2010 may grow only 10.0-14.0 percent, but a brighter outlook is possible if difficulties in the Chinese and Euro-zone economies ease.
  • Thailand's imports will trend higher because of the low base effect of last year, plus higher commodity prices and tariff reductions with FTAs. As a result, KResearch expects that our imports in 2010 will grow about 20.0-25.0 percent.
  • Because imports will likely grow at a higher rate than exports, Thailand's trade surplus in 2010 may decline from levels in 2009, but should manage a total of some USD6.6-9.3 billion – equivalent to THB220-300 billion.
This high trade surplus would reflect the fact that Thailand's international trade stability is still intact, which would help strengthen the Baht. However, it will be important to monitor movements of the US Dollar that will receive a further boost from expected US Federal Reserve (Fed) increases in their Discount Rate again following a recent increase to 0.75 percent (0.50 percent before).

In addition, the fragile global economic recovery due to economic instability seen in several nations may cause greater volatility in foreign current exchange rates, so Thai exporters and importers are advised to monitor this situation and brace for possible effects. Significantly, Thai exporters who compete in price-sensitive markets are being urged to make major adjustments to cope with volatility in the Baht and further devaluation of Vietnam's currency after the Vietnamese government devalued the Dong by some 9 percent against the USD Dollar in their two latest adjustments. Thailand's exports that compete with Vietnam include agricultural products – notably rice and shrimp – plus labor intensive products such as textiles, garments and footwear.