8M11 Exports to Europe Up 22.4%, while 16-20% Growth Expected for Overall 2011 due to Decelerating Performance in Final Quarter (Current Issue No. 2264)

Thai exports to Europe in 8M11 reported a higher-than-expected growth of 22.4 percent YoY, thanks to satisfactory performance of key economies there. Nevertheless, Thai exports to Europe over the remainder of this year may be pressured by the fragile economy, coupled with threats resulting from the Greek debt crisis that remains unresolved, thus adding volatility to EU economies and global markets.

Given this situation, KResearch forecasts on Thai export performance to the EU overall in 2011, based on two scenarios:

- First scenario: If the EU economy (EU27) can grow at the IMF forecast level of 1.6-1.7 percent and the debt contagion does not affect more countries, aside from PIIGS, it is expected that Thai exports to Europe in 2011 will grow in a range of 16-20 percent, but may decelerate and record single-digit growth in 2012.

- Second scenario: If the EU economy decelerates dramatically and enters a new recession while the debt crisis escalates and affects other countries, Thai exports to Europe in 2011 will likely grow only 13-18 percent, and a contraction may be seen in 2012.

Exports that may be affected by a prolonged downward economic trend there may include items that Thailand are highly dependent on the EU market, e.g., food, such as prepared poultry; fresh, chilled or frozen cuttlefish, squids and octopus; prepared or preserved fruits; sauces and preparations; and fresh, chilled or frozen shrimps, prawns and lobster, plus industrial products, e.g., bicycles, parts and accessories; footwear and parts; garments; air conditioning machine and parts; motorcycles, parts and accessories; radio-broadcast receivers and parts; and electrical transformers and parts, etc. In addition, other product categories for which we used to depend on the European market, e.g., precious stones and jewelry as well as a variety of consumer goods, may be threatened by this unpleasant economic situation due to austerity measures and a severe labor market that may dampen consumer purchasing power.

As a result, more adjustments are needed for Thai exporters to brace for another deceleration in Europe that may affect broader economic sectors, thus forcing consumers to economize even further. Thai exporters would then face difficulty in maintaining their existing customers and seeking new markets. Then, they should focus on managing costs and hedge against exchange rates, studying global markets and checking customer liquidity to prevent any possible losses as well as revising export strategies and product packaging to meet the demand of consumers there.