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5 Jul 2023

Econ Digest

Thailand’s fruit exports to expand in 2023, but various pressures should be monitored


        KResearch holds the view that the value of Thailand's fruit shipments in the first five months of 2023 saw promising growth thanks to the arrival of the main fruit season, the expansion of fresh fruit exports as compared to a low base in 2022, and a significant increase in fruit exports to new markets. However, the economic slowdown among Thailand’s key trading partners, particularly China and the US, and the impact of volatile weather conditions, may put pressure on Thailand’s fruit export growth during the remainder of the year. As a result, Thai fruit exports for the full-year 2023 may reach around USD7.8 billion, expanding by 2.3% YoY. Products with growth potential include fresh, chilled and frozen fruits, driven by demand from the Chinese market. Meanwhile, products likely to see slower growth are canned and processed fruits due to reduced exports to major markets like the US and the EU.

        Looking ahead, managing production costs, especially from raw materials and labor which collectively account for nearly 80% of total costs on average, will remain a challenge for fruit exporters. Extreme weather events, the rapid rise in global temperatures and sea levels, along with the El Niño phenomenon pose risks to agricultural products - the upstream raw material for the fruit business, especially canned and processed fruits. Meanwhile, labor costs will tend to increase due to the minimum wage increase, following the formation of a new government, amid labor shortages and competition for workforce in the manufacturing sector. Businesses thus need to adapt by improving their workers’ skills and productivity, while investing in production technologies to replace human workers. However, such adjustments would lead to increased costs.

        Additionally, utility and financial costs are expected to remain high, which could possibly affect the competitiveness of exporters and importers. Under these circumstances, the fruit business, especially canned and processed fruits, will become more complex and challenging, particularly for numerous small and micro operators. The majority of such businesses still operate only at a marginal profit or even at a loss. Consequently, the ability to increase sales or generate profits is a challenge for businesses amid intensified competition.

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