Thailand’s exports have been shrinking. The strong Thai Baht and the US-Sino trade war weigh on the country’s economy.
"It will be tough this year," said Duangrat Prajaksilpthai, an economist at TMB Bank, when asked to provide an outlook for Thailand’s export industry in 2019.
Thailand is Southeast Asia’s second-largest economy. Exports account for two-thirds of the country’s GDP. In January 2019, exports were 5.56% lower than in January 2018.
Thai baht up 5% against the US dollar
The recent surge of the Thai Baht is one reason for shrinking exports. Data from Bloomberg shows that the Baht has climbed 5% against the US dollar in the second half of 2018.
Thailand holds US$ 207 billion in foreign reserves, placing the country at rank 12 on the list of countries with the highest foreign currency reserves. That, combined with recent US dollar weakness and Thailand’s current account surplus has resulted in a stronger Thai Baht.
Krungthai Bank chief strategist Jitipol Puksamatanan says the Baht will remain strong in 2019. ING Group economist Prakash Sakpal, however, believes the current uncertain political environment around the announced general election could weigh on the currency.
US-Sino Trade war and tensions between India and Pakistan affect Thai exports
Besides the strong Baht, the US-Sino trade war has also affected Thailand. In January, exports to the US were 8.3% higher than in January 2018, but exports to China decreased by 16.7%. The drop was mostly due to falling shipments of electronics, cars, rice, and gold, according to the Thai Ministry of Commerce.
Duangrat Prajaksilpthai says, “Exports were already expected to slow down because of the impact of the trade war. Baht strength on top of that will curb export revenue when converted to local currency."
It’s not just the US-Sino trade war. Tensions between India and Pakistan might also affect Thailand’s exports in the short term, according to senior officials of the Ministry of Commerce.
Other observers are more optimistic about Thailand’s overall economic outlook. The World Bank, for example, believes increasing investments and private consumption will fill most of the gap resulting from slowing exports. Likewise, the Thai Ministry of Commerce forecasts export growth of 8% for this year.
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