Thailand's exports grew at a slower than expected pace in July 2010, reaching only USD15.565 billion, versus a record high of USD18.038 billion in June. That figure represented a contraction of 12.5 percent MoM, (seasonally-adjusted). When compared to the same period of 2009, exports in July 2010 contracted 20.6 percent YoY, against the 46.3 percent growth recorded in June 2010.
This slowdown has heightened anxiety toward the prospects for exports over the remainder of 2010 amid sluggishness foreseen in global demand, and a slowdown in the global economy becomes more apparent. In addition, the Baht's rapid appreciation will put further pressure on the price competitiveness of Thai exports.
Notwithstanding this, KResearch maintains our current growth projection for Thailand's exports at 22.0-27.0 percent in 2010 on the view that despite economic slowdowns seen in many regions, the global economy should continue its recovery momentum, and thus keep it from dipping back into recession. The global economy may exhibit slower growth because former economic stimuli implemented by many nations via monetary and fiscal measures have gradually ended.
Given the upward trends in interest rates in many emerging economies, and inventories in the business sector have climbed back to sufficient levels, (meaning that further build-ups of inventory are not likely to contribute toward significant growth in the manufacturing sector as seen before), growth in the global economy would be driven by the actual fundamentals of each national economy. However, strong demand for Thai farm and food products plus capacity expansion undertaken in several Thai industrial sectors – including the automotive industry – to meet export orders next month should help support export growth in 2010.
Nevertheless, exporters are advised to be vigilant toward further appreciation of the Baht that may soon break through THB31.50/USD, as that may affect their competitiveness and Baht-denominated income, as well as profit margins, if they have to cut prices to maintain their customers.
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