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18 Mar 2011


Thai Exports to Mideast: Opportunities amid Political Turmoil (Business Brief No.3062)

Political unrest during the first-few months of 2011 has caused some risks to the overall economic and political situation in the Mideast, which is the world's largest oil producing and exporting region, thus resulting in high volatility in global oil prices. Although the Japanese earthquake and tsunami disaster has softened oil prices, other problems in Bahrain that continue, unrest in Libya that is unlikely to end soon and the United Nations Security Council (UNSC)'s resolution to impose a no-fly zone over Libya have led to another surge in global oil prices on March 17, 2011. Oil prices that remain high will likely affect the Thai economy that more highly depends on oil imports than other countries in this region.
Regarding the impact of Mideast turmoil on trade, KResearch views that any direct impact on Thai exports to the Mideast will likely be limited. It is expected that the major markets for Thai exports to the Mideast in 2011 will be the Gulf Cooperation Council (GCC), the group of world's large oil producing and exporting nations, accounting for 64 percent of our export volume to the region. The GCC has relatively stable economic and political structures with high purchasing power. As a result, it is expected that Thai exports to the Mideast in 2011 will likely grow at a rate close to 10 percent.
A bright future may lie ahead for many exports such as automobiles, accessories and parts, air conditioners and parts, gem and jewelry, computers, related equipment and parts, as well as products necessary for their manufacturing and construction sectors such as iron, steel and products, rubber products and many types of machinery. However, products that may be adversely affected include textiles and garments, household textiles, canned and processed vegetables and fruit, paper, wood and wooden products, etc.

However, there are some issues that should be closely monitored, particularly in case that the unrest there will intensify further and drive oil prices higher, which would then affect the manufacturing sector globally as well as increasing inflation worldwide, thus dampening demand. As a result, Thai exports may be affected by unexpectedly lower demand, given that scenario.