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28 Apr 2006


Oil Prices, Strong Baht: Risk Factors Affecting Furniture Industry in 2006


The outlook for the Thai furniture industry for 2006, both in the domestic and overseas markets, is expected to be static, with growth in the market value being nil, or maintaining the same level seen in 2005. This is due to several factors, notably steep oil prices, rising inflation and interest rates. Besides this, growth in domestic demand is expected to decelerate, while the Baht is on an upward trend. If the Baht's appreciation is sustained, its impact on the Thai furniture trade will be quite significant and this may result in a falling trade surplus for furniture exports in 2006 amid intense competition in both the domestic and international markets.

KASIKORN RESEARCH CENTER (KResearch) is of the opinion that Thai furniture producers and exporters should immediately find ways to tackle foreign exchange risks by seeking advice from experts, and it would be best if they can turn the so-called 'Baht Crisis' into a business opportunity. At the same time, they should focus on production improvements and continuous review of their marketing strategies, especially in production planning and new product designs that are stylish and durable in order to meet consumer needs. Moreover, local materials should be optimized, along with effective market planning and cost management to enhance their pricing position. Besides this, cooperation between the public and private sectors should help enhance the international competitiveness of the Thai furniture industry amid global trade liberalization in which bilateral free trade agreements are increasingly dominating the scene. This cooperation could involve discussions on opportunities and threats to find the right policies and measures to enhance the competitiveness of the Thai furniture industry. There should also be cooperation to improve skills and designs to achieve a par with international levels, plus training of new designers for the sustainability of the industry.