Exports face Brexit squeeze
British vote creates 'huge impact' on global economy that will see a 2%decline in Thai sales.
THAI EXPORTERS and capital markets will likely face a prolonged negative impact from Britain’s vote last week to quit the European Union, local analysts have said.
The Brexit vote saw the pound lose another 3 per cent in value against the dollar yesterday.
Although Thai shipments to the UK are relatively small – worth around 1 per cent of Thai gross domestic product (GDP), Nopporn Thepsithar, chairman of the Thai National Shippers Council, said Brexit had created a huge impact and the global economy could slow down over the second half of this year.
As a result, overall Thai exports could continue to contract in the third and fourth quarters, and cause a drop of more than 2 per cent in exports for the whole year.
“The immediate impacts are on exchange rates, but the global economy likely faces stagnation. Thai exports would also be hit by the global economy and weakening pound sterling and Euro currency,” he said.
So, Nopporn said the Thai government needed to review its international trade policy and take lessons learned for regional groups such as Asean
Prime Minister Prayut Chan-o-cha, meanwhile, admitted that Brexit would hurt the export sector, which accounts for 70 per cent of Thailand’s GDP.
Commerce Minister Apiradi Tantraporn said the ministry will need to adjust some export promotion plans, while closely monitoring the Brexit process over the next two years.
Surapong Paisitpatanapong, chair of the Federation of Thai Industry’s Automotive Industry Club, said vehicles, especially eco-car exports to the EU, were likely to decrease by about 10 percent this year due to the Brexit. But the longer term effects would depend on the UK’s new trade policy.
Duenden Nikomborilak, research director to the Thailand Development Research Institute, said Brexit could lead to a collapse of the EU, as other member states could follow the UK’s move and conduct a referendum on whether they also want to leave.
The Thai stock market gained 11 points to close at 1,424 yesterday and the outlook that it will move “sideways up”. But Brexit will likely stop the SET index from topping the 1,500 level towards the end of this year, according to Paiboon Nalinthrangkurn, president of the Investment Analysts Association (IAA).
Jitiphol Preuksamethanun of Thai Military Bank (TMB) said the baht was likely to weaken against the dollar to trade around 35.20-35.65 while there were capital outflows of Bt784 million and Bt1.66 billion on sales of Thai equities and bonds, respectively, following Brexit.
Hong Kong and Shanghai Bank (HSBC), meanwhile, said Thailand may join other Asian economies in easing monetary policy to cushion the impacts from Brexit, but the move might not be immediate. At present, the Thai policy interest rate is set at 1.5 per cent. According to HSBC, weakened economic growth in Asia will prompt policymakers across the region to do more to steady the outlook.
“Still, not everyone has the same room for manoeuvre. Economies where the bias for further easing may have increased include Australia, New Zealand, Korea, Japan, China and Thailand. A little more constrained on the monetary front are India, Indonesia and Malaysia, with currency weakness either risking to stoke price pressures or tighten financial conditions (or both). Fiscally, the latter three, as well as Thailand and Taiwan, are also more constrained than others,” the HSBC note said.
