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Strong baht may rewrite export goal

Feb 06. 2018
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THE Thai National Shippers’ Council (TNSC) said export growth this year could come in well below its estimate of 5.5 per cent due to a stronger baht and the recent increases in the country’s minimum daily wage. The more downbeat view has prompted the influential group to call on the government to launch relief measures to shore up Thai exports.

TNSC chairman Ghanyapad Tantipipatpong said that export income could drop by as much as US$5 billion this year in the absence of official relief measures and continued gains in the baht.

Under this scenario, the growth in exports is expected to fall well short of the announced projection of 5.5 per cent, at 3.5-4 per cent.

Since the start of this year, the baht’s appreciation has resulted in a 2.85 per cent hit on Thai exports and the wage rises have also been a drag on overall export, Ghanyapad said.

 “Currently, the impacts have not yet been clear. Producers of local raw materials like agricultural products and food, and labour-intensive industries like textiles and garments are expected to be hit,” she said.

As yet, there have no relief measures from the government or any adjustment assistance to cope with this situation, she said.

Chaichan Charoensuk, TNSC secretary-general, said that this initial impact is based on the country’s export potential, while the costs for converting foreign currencies into baht and rising labour costs raise the overall costs and product prices. As a result, Thailand’s export competitiveness is reduced.

Likely hard-hit industries range from frozen and processed chicken, agricultural products and fresh fruits and vegetables to textiles and garments, he said. If the baht appreciates to 30-31 per US dollar, Thai export will expand 3.5 per cent and if the baht stays at 33 per US dollar, export will grow higher at 5.5 per cent this year, he said.

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) estimates export growth in a range of 3.5-6 per cent this year.

Chaichan said that a clearer view on the impact will emerge in the second quarter of this year after the wage increases take effect and the cost from the strong baht becomes more evident clearer government measures.

The TNSC is leaving its export growth estimate unchanged at 5.5 per cent and will revise the figure again in the second quarter of this year, he said.

Visit Limluecha, TNSC vice chairman, said that Thailand now needs to start upgrading its capabilities in labour skills and technologies from upstream to downstream as a means of boosting its competitiveness against rivals.

“Thai baht has appreciated more than its competitors, like the Vietnamese currency, while Vietnam and Indonesia have lower labour costs than Thailand. Thailand also loses advantages to them in terms of the exchange rate. Therefore, we have to review ourselves about our real competitiveness,” he said.

Ghanyapad has urged the government to give assistance extending from a one-year postponement of the wage rises, tax measures for small and medium-sized enterprises and imports of digital machinery and robots, soft loans and production cost controls across supply chains to plan for the wage rises.

Predee Daochai, chairman of the Thai Bankers’ Association, said after a JSCCIB meeting that private sector is very worried about the baht appreciation, adding that it was difficult to make predictions about its value to its high volatility. “The JSCCIB still forecasts the baht at 32 per US dollar on average for 2018. And we have not changed our forecast now,” he said.

The baht appreciation has come from Thailand’s high export growth and strong economic growth with higher foreign reserves and foreign investment in Thai stocks and bonds, while the United States has a policy for US dollar depreciation, he said.

Meanwhile, the JSCCIB set up a working group to work with the government to find solutions to the baht appreciation. It urges the government to impose stricter penalties on speculators on the baht that do not make actual investments, encourage the private sector to invest and set up manufacturing bases overseas and to make deposits abroad and purchase more foreign currencies, while promoting and educating SMEs on the need to hedge against foreign exchange risks.

In regard to the wage rises, labour averages 8-14 per cent of total costs, depending on the extent of labour intensive methods required and the wage rises will likely raise the labour cost by 2 per cent on average and increase total costs by 0.3 per cent, Predee said.


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