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25 Sep 2024

Econ Digest

HDDs and gold boosted Thailand’s exports by 7% in August 2024. Overall, exports are projected to rise 2.5% in 2024.

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        Thailand’s exports in August 2024 continued to expand strongly by 7.0% year-on-year, exceeding market expectations of 6.0% year-on-year. This growth was driven by exports of computer components, particularly Hard Disk Drives, which surged by 112.2% year-on-year, partly due to a low base in the previous year. Major markets for these exports included the United States, China, and Europe. Additionally, gold exports expanded for the fourth consecutive month, growing by 99.0% year-on-year, with Switzerland recording the highest growth rate for Thai exports in this month at 175.1% year-on-year.                 Furthermore, agricultural exports, led by rice and rubber, also expanded due to strong demand and higher prices.
Automotive and components exports contracted by -17.9% year-on-year in August 2024 due to a high base effect from the previous year’s surge in automotive exports related to military exercises; Thailand’s electronic circuit board exports also contracted by -33.2% year-on-year as a result of technology that did not align with market demands.
KResearch has revised its forecast for overall Thai exports in 2024 to grow by 2.5%, up from the previous forecast of 1.5% due to:
1.    Thailand’s exports expanded by a robust 4.2% year-on-year in the first eight months of 2024, driven by the cyclical recovery in electronic products exports and a significant 28.8% year-on-year surge in unmolded gold exports.
2.    The trend of unmolded gold exports is expected to continue increasing due to factors such as global central banks’ policies of lowering interest rates and escalating geopolitical issues. These factors have led to a sustained increase in gold prices and demand as a safe-haven asset (Figure 2).
3.    The trend of electronic product exports is expected to continue expanding due to the ongoing upcycle (Figure 3). Data from the first 20 days of September 2024 shows that exports to South Korea have continued to grow, driven by a 26.2% year-on-year increase in semiconductor exports.

        However, Thailand’s exports for the remainder of the year are expected to grow at a slower pace when compared to the first eight months, following the global trade slowdown. This is reflected in the Drewry Shipping Container Index, which has declined by more than 30% in the past two months, despite the third quarter typically being the high season for global trade. Additionally, the impact of flooding on agricultural production and exports must be monitored.
        The rapid appreciation of the Thai baht is expected to impact profit margins of exporters. As order volumes depend on agreements between buyers and sellers and the flexibility to adjust prices-factors that vary by product and industry, depending on competition with other countries’ exporters that are heavily reliant on domestic raw materials such as agricultural products or processed food, they will experience greater revenue impacts. This is because they cannot utilize the natural hedge mechanism to mitigate the impact of exchange rate fluctuations, unlike those who primarily use imported raw materials.

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