As of August 2015, Brent crude oil prices stood at USD47/barrel, plunging 59.2 percent from the mid-2014 record high. It is expected that the current phase of low oil prices will last longer than the previous oil price collapse of 2008-2009, and this is bound to have serious repercussions on the Middle East and North Africa (MENA) economy that is heavily dependent on oil trade.
Because this slump has reduced Thai exports to the MENA region by 14.7 percent YoY, representing a USD6.1 billion drop, during 7M15, we at KResearch hold the view that Thai shipments to that region will continue to weaken over the remainder of 2015, thus bringing full-year exports to perhaps USD10.2 billion, contracting 13.0 percent YoY, or within our projected band of USD9.9-10.6 billion, shrinking 15.6-9.6 percent YoY. Thus, Thailand may lose its export income from the MENA region by some USD1.5 billion from that reported in 2014.
Although 2016 crude oil prices are projected to improve somewhat over 2015, they should nevertheless remain lower than the levels that could help ease fiscal and economic pressure on the MENA region. Close attention must be paid to the largest economy there, Saudi Arabia, because the entire region could face greater risk if Saudi Arabia's economy deteriorates further. Consequently, Thai exports to the MENA region will likely remain slow during 2016. Currently, Saudi Arabia is Thailand's second largest export destination within that region.
Relatively bleak prospects are seen in our luxury product and non-essential consumer good exports. However, because the MENA region has a huge consumer market of 430 million people, many Thai exports could make greater inroads into this market, e.g., rice, sugar, vegetables, fruit, fresh chicken, instant noodles, wheat-based desserts, food seasonings, meat products, prepared foods, including soup, cereals, cocoa, snacks and rice-based products. Thai Halal foods – for which the Thai government is currently promoting production and investment – should especially have rosier prospects in the MENA region, as well.