Global Headwinds Threatening Thai Export Outlook (Business Brief No.3355 Full Ed.)

The continuing decline in Thai exports during August (Ministry of Commerce data, September 25) mirrored the adverse effect of the global economic downturn on Thailand's key trade partners, especially China, being our largest export destination. The August imports fell, too, for the first time in seven months, led by declines in raw materials and intermediate products, signaling bleak prospects ahead due to sluggish international demand that is unlikely to recover any time soon.

Although the market has already factored in signs of Thai export weakness amid gloomy global trade, the latest export data was even more disappointing, as it contracted more substantially than predicted by many economists, thus underscoring our KResearch assessment that exports are unlikely to recover within 2012. This would likely be the case even if our outward trade registers double-digit growth over the next two months of the year, as monthly statistics show that it would be unlikely that Thai exports will exceed USD20 billion/month, as seen prior to the flood crisis in late 2011.

Given this, KResearch expects that our outward trade may shrink again by not less than 2.0 percent YoY in 3Q12, against the 2.0 percent YoY growth achieved in 2Q12. Therefore, we believe that our current projection for 2012 exports at 3.0-7.0 percent growth is reasonable, because the overall outlook has not changed that much from what we had assessed before, while several export items, e.g., rubber, rice and gold could help offset overall export declines in other categories to major markets. We remain cautious toward any 2013 export performance projection, but we do expect that double-digit growth is achievable if the US and Europe can sustain economic stability.