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21 Oct 2009

Thai Economy

Exports in 4Q09 May Shift to Positive Growth More Than 7.5 Percent …But Beware of Stronger Baht (Business Brief No.2670)

Thailand’ exports in September improved dramatically, with the value increased to USD14,905 million, up from USD13,281 million in the preceding month. Compared to the same period Year-on-Year, exports contracted slower to 8.5 percent, from 18.4 in the preceding month. Taking the seasonally adjusted export value, Month-on-Month, into consideration, it increased 8.5 percent, showing the healthiest hike in 20 months. Although exports this year are boosted by gold exports, increasing 163 percent (YoY) with the high value of USD1,013 million, the exports excluding gold also show improved direction, contracting 12.7 (YoY), which decelerated rather substantially from the contraction of 20.2 percent in the preceding month. The import front in September was also bright, contracting 17.9 percent (YoY), with the value of USD12,925 million, against USD11,201 million and the high contraction of 32.8 percent seen in the preceding month. This is mainly due to the substantially higher oil imports in these months when the global crude prices dropped. For Thailand’s trade balance, in September, we posted a trade surplus of USD1,980 million, falling slightly from USD2,079 million in the preceding month.
In the broad picture, in the first 9 months of 2009, exports valued USD109,301 million, contracting 21.4 percent, while imports had a value of USD93,544 million, contracting 32.7 percent, the trade surplus valued USD15,757 million, up from the deficit of USD1,448 million in 2008. For the export trend in the remaining months of this year, the economic rebound and higher imports of capital goods and raw materials in September should be positive indicators for goods production and exports in the upcoming months. These factors will be helpful to the gradual recovery of Thailand’s exports.
From the unexpected high export and import figures in September, KASIKORN RESEARCH CENTER has raised the forecast on Thailand’s exports in 2009 to contract 12.0-15.0 percent, while imports shrank 24.0-28.0 percent, fromthe former forecast that exports and imports would contract 14.5-17.5 percent and 25.5-29.0 percent respectively. It isexpected that exports in 4Q09 may grow more than 7.5 percent.
KResearch projects that the exports recovery accelerating faster than imports will result in an unprecedented high surplus in Thailand’s trade balance in 2009, probably higher than USD20 billion, and this surplus trend may carry on into 2010. With the domestic factor that pushes Thailand to post a high trade surplus and deteriorating confidence in USD, the Baht may continue appreciating and hamper the competitiveness and profit of Thai export entrepreneurs, particularly under elastic demand, with similar products and high price sensitivity among consumers. So it is important that exporters find suitable guidelines to cope with a stronger Baht. The short term adjustment may be undertaken by using the appropriate FOREX risk management tools. Businesses may negotiate with customers for trade deals in other currencies aside from USD and diversify risks of export markets to have more variety. Concerning the medium to long term adjustment, manufacturers must create a distinction in their goods and services to avoid price competitiveness. Other factors that should be followed up, which may affect Thailand’s exports in the near term, would be entrepreneurs’ liquidity, tighter labor market situation in some industries and the shift toward domestic market protection by some trade partners.

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Thai Economy