US government shutdown may hit Thai exports and baht, warns Finance Ministry

Amid the US federal government shutdown triggered by Congress failing to pass a budget by the October 1 deadline, the Thai Ministry of Finance has issued a warning about potential impacts on the global economy, including Thailand, and outlined mitigation measures for the export sector and currency fluctuations.

Deputy Finance Minister Vorapak Tanyawong stated on his personal Facebook page that the US shutdown has affected approximately 750,000 federal employees, as non-essential services were suspended, immediately impacting businesses and citizens in the United States. He explained the situation and its impact as follows:

1. Why the shutdown occurred:

• The US government requires an annual budget approval, but negotiations between the Republican and Democratic parties failed.
• Republicans proposed a Continuing Resolution to maintain spending until November 21.
• Democrats insisted on extending healthcare coverage as part of the budget.
• Talks collapsed at the White House, prompting an immediate government shutdown.

2. Domestic impacts in the US:

• Several agencies closed, including National Parks, Customs, and the Bureau of Labor Statistics, delaying the September employment report.
• The labour market is affected, influencing the Federal Reserve’s considerations on interest rate cuts.
• President Trump signalled that some employees may face permanent layoffs rather than temporary suspension, further weakening the labour market.
• Economic effects depend on duration: the 2018-2019 shutdown caused a $11 billion GDP loss, $3 billion of which was permanent.

3. Potential effects on Thailand if the situation continues:

• Baht and financial markets: Investors may move funds to safer assets, causing currency volatility; the Stock Exchange of Thailand could face pressure.
• Exports: Orders from the US, particularly electronics and industrial goods, could be delayed; slow customs processing may cause port congestion.
• Tourism: Cautious American consumers may reduce travel and spending.
• Investment confidence: Uncertainty in the US may affect emerging markets, including Thailand, although early Fed rate cuts could return some capital to the region.

4. Measures Thailand should prepare:

• Currency stability: The Bank of Thailand should be ready to intervene to prevent impacts on imports and exports.
• Export risk management: Diversify markets (China, ASEAN, Middle East) and coordinate with trade diplomats in the US to mitigate customs delays.
• Business support: Consider soft landing measures such as low-interest loans for SMEs and FX hedging for exporters affected by the US market.