Growth an uphill task for Thai exports for 3 years

Thai industries, in particularly fisheries, have been urged to adjust their production and operations to be compliant with international standards on sustainability measures and higher innovation to ensure competitiveness and promote the Kingdom as a trading nation.

Council chairman Nopporn Thepsithar said yesterday that the country faces high risk of declining shipments after exports in the first quarter contracted almost 4 per cent, while it is expected to grow only 1-2 per cent in the rest of the year.

Although the baht’s recent depreciation could help stimulate exports, Thai shipments also face many other issues that could lead to only a small expansion in the long run," said Nopporn.

Speaking yesterday on the sidelines of "Euromoney conference: The Greater Mekong Investment forum ", where he delivered the keynote address, Deputy Prime Minister MR Pridiyathorn Devakula said exports in April had contracted by 1.7 per cent. But this is less than the contraction of more than 4 per cent in the first quarter although the weakening of the baht should support expansion of the sector in the next quarters ahead.

"It would take around three months for the effect from the weaker baht to reflect in the performance of the export sector because it would take some time to re-quote prices," he added.

He said the recent depreciation of the baht was caused by consecutive policy interest rate cuts and the appreciation of the US dollar has provided "encouragement" for Thailand’s export sector.

The baht has slightly depreciated from Bt32.85 to the US dollar on March 11 (the day the Bank of Thailand cut the benchmark interest rate for the first time in a year) to Bt32.90 on April 29 (the second rate cut this year) before plunging to Bt33.73 to the US dollar as of May 27.

Bank of Thailand (BOT) Governor Prasarn Trairatvorakul said after his speech at yesterday’s forum that the slowdown in global demand had affected many countries in the region and said that the 0.3 per cent economic expansion in the first quarter has shown that the Thai economy is "recovering" though the recovery is "marginal".

"Global trading activity has fallen and countries are less dependent on imports. The BOT is beginning to realise that the importance of the exchange rate for the export sector is more than before because these changes have contributed to the increased competition in prices," he said.

"The weaker baht has provided exporters with more profit but the expansion of the export sector would depend more on the demand and other factors such as the quality of the products than the exchange rate" he said.

Last year, Thailand’s shipments dropped 0.41 per cent, while in 2013, they declined by 0.32 per cent after having expanded 2.9 per cent in 2012.

At present, the TNSC has maintained its export forecast for the whole year at zero growth, against the Commerce Ministry’s goal of 1.2 per cent. Nopporn said that Thai shipments could see a small decline for the whole year owing to many negative factors.

Among the factors that could cause shipments to shrink are the low fuel price. Thailand has relied too much on shipment of energy and by-products from energy, accounting for 24 per cent of the total shipment value of the country.

Thailand has also relied too much on commodities exports, without value-addition.

Despite the depreciation of the baht, the global economy still has risk on currencies fluctuating amid a weakening euro economy.

Moreover, the TNSC found Thai products have been highly challenged in cross-border trading, as many neighbouring countries are developing their production sector and attract foreign direct investments, which will soon enable them to produce their own products and rely less on imports from Thailand.

Nopporn said that with many challenges, Thai industries, not only fishery but others, should adapt themselves to international standards to address concerns on environment, labour, CSR, and innovation to increase their competitiveness in the global market.

Vallop Vitanakorn, vice chairman to the council, said Thai exports in the second quarter are expected to see only a small recovery from the first quarter or decline by 2 per cent. In the third and fourth quarters, Thai shipments should grow stronger from the depreciation of the baht and economic recovery in some countries.

However, due to less development in many industries, while Thailand has relied too much on fuel export amidst low fuel price in the global, Thai export in the third and fourth quarter will grow only in a small figure or only 1-3 per cent.

Vallop added that Thai exporters are expecting the baht to remain weak, at Bt34-Bt35 against the greenback so that it will help ensure continue export growth this year.