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19 Sep 2008

Thai Economy

August 08 Exports: Lower-than-expected Growth Raises Concern over Export Outlook in the Remainder of this Year (Business Breif No.2293)

On September 19, 2008, the Ministry of Commerce reported international trade data for August 2008 with the key points summarized in the text below:
- According to a report by the Ministry of Commerce, Thai exports during August 2008 posted the lower-than-expected 14.9 percent growth, y-o-y (compared to 43.9 percent growth in July) to reach USD15,887.6 million. Meanwhile, imports expanded 26.9 percent (against the growth of 55.1 percent in July) to USD16,669.1 million. Despite slower growth, it was considerably higher than export growth. As a result, Thailand posted a trade deficit of USD781.5 million, against the deficit of USD1,026.91 million in the month before, and this is the fifth month of deficits this year.
- Slower growth of exports in August worsened the outlook for exports over the remainder of this year due to the emergence of many negative factors in September. Some internal factors, i.e., political unrest, caused delays in some export categories, because some of Thailand's trade partners, who were scheduled to enter trade talks, postponed their negotiations for the time being. Nevertheless, the impact of domestic politics on Thai exports is not as pronounced as external factors, such as the financial institution crisis in the USA and recession signals in Japan and Europe that might incite a domino effect on other economies globally. This, therefore, will adversely affect Thai exports in 4Q08 when exports normally grow in line with increased purchase orders to meet growing demand during the Christmas and New Year holiday seasons. In addition, 4Q08 exports will have to be compared to the high base of 4Q07 when the exports grew as high as 24 percent. Meanwhile, the depreciating trend in commodity prices may adversely affect the export value of farm produce, oil and base metals.
- KResearch expects that if economic growth in many regions continues to slow sharply, Thai exports in 4Q08 will grow only 10-15 percent. If the world economic downturn deepens along with a further slump in global commodity prices, Thai exports may register single-digit growth in 4Q08, the first time in more than a year. Nevertheless, high export growth achieved since the beginning of this year should help boost Thai export growth for the entirety of 2008 to around 20 percent, which would be higher than the 17.3 percent growth of 2007.

Although Thailand may be able to maintain high export growth in 2008, several challenges lie ahead for Thai exports in 2009, causing declines in both volume and value due to decelerating growth in many economies next year. Meanwhile, farm produce prices and those of certain of commodities in 2009 will not rise as high as in 2008. In fact, the prices of some commodities might decline. Therefore, related government and private agencies should come up guidelines to brace for the expected slowdown in exports next year.

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