Growth rate may sink to 10%: StanChart
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More domestic investment needed to cut reliance, regain balance, meet hears
Given the strong possibility of slow economic growth in the United States, a recession in Europe and China’s soft landing, Thai export growth could slump this year to between 10 and 13 per cent, according to Standard Chartered Bank (Thai).
“It would be quite great [an achievement], if Thailand could see export growth of 10 per cent this year,” said Usara Wilaipich, senior economist at the bank.
Speaking recently at a global research briefing titled “Global Focus – 2012: Fragile West, Resilient East” in Bangkok, Usara said the country was now too reliant on exports and external demand. Exports account for about 70 per cent of gross domestic product.
“We see recession in almost all countries [in the euro area]. Recession in Europe will impact the whole world,” said John Calverley, head of macroeconomic research at London-based Standard Chartered (StanChart).
“The US is expected to slow down in the first half of 2012 and gain more strength in the second half. China is slowing. We expect a soft landing in China,” he said.
StanChart forecasts Thailand’s current-account balance to swing from surplus to a marginal deficit of 0.1 per cent of GDP this year.
The bank cites expected falls in the country’s tourism income and exports on the back of lower global demand, and higher demand for imports for machinery and raw-material replacement after the severe floods late last year.
Callum Henderson, global head of foreign-exchange research at StanChart, expects short-term bearishness in the baht due to the likelihood of slower exports.
He expects the US dollar to strengthen in the current quarter but weaken in the second half, particularly against Asian currencies, excluding Japan.
Exporters in Asia, excluding Japan, to the US should keep low hedge ratios in the current quarter and raise the ratios from the second quarter, he said. High hedge ratios are suggested for those exporting to the euro area in the first half of the year.
To move away from too much reliance on exports and regain economic balance, there is a need for more investment from both the public and private sectors in Thailand, Usara said.
Another crucial issue is natural-disaster management, which could pinpoint direct investors’ decision-making on whether they will select Thailand or its neighbouring countries as their bases.
Citing the upcoming Asean Economic Community, which will materialise in 2015, Usara expects Thailand to benefit from regional integration. However, of huge importance is the development of risk management and logistics.
“In the past few months, a good example is the floods, which disrupted businesses in Thailand and the global supply chain,” she said.
The Kingdom needs a clear medium- to long-term plan for its logistics network, she added.
