Export slowdown to cast shadow over GDP growth next year

The local economy has for now passed its peak growth of 4.9 per cent enjoyed in the first quarter this year, says Don Nakornthab, the Bank of Thailand (BOT)’s senior director.
Phipat Luengnaruemitchai, assistant managing director/head of Private Wealth Management Research at Phatra Securities, agrees that the Thai economy will grow at a slower pace in 2019 and 2020.

 
Meanwhile, next year’s GDP growth is forecast at 4.3 and 4.4 per cent by Kasikorn Research Centre (KResearch) and the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) respectively. 
At 3.7 per cent, Moody’s Investors Service predicted the lowest GDP growth rate for next year among those surveyed, while BOT has forecast just 4 per cent, and Siam Commercial Bank (SCB)’s Economic Intelligence Centre (EIC) predicts 4.2 per cent.
“The decline in Thai exports in the second half of this year is the key factor behind the expected slowdown in economic growth next year,” said Phipat of Phatra Securities.
Export is a key driver of the Thai economy, contributing up to 75.21 per cent of the Kingdom’s GDP in 2018, according to KTB Securities (Thailand) (KTBST). 
Thai export growth is predicted to fall to a mere 4.3 per cent in 2019 compared with an estimate of 7.5 per cent this year, according to SCB’s EIC. KResearch offers a similar view, saying export growth will slow to 4.5 per cent, compared to this year’s forecast of 7.7 per cent.
Meanwhile, Thailand’s Ministry of Commerce is presenting a rosier picture, maintaining its ambitious 8 per cent growth target for exports in both 2018 and 2019 despite the concerns of other economic institutions. 
The economists agree that the most significant contributor to the withering export growth prediction is the ongoing US-China trade war. 
“The impacts of the trade war have already begun to show signs in Thailand, and we expect the negative effects on our exports to continue in 2019,” said Finance Minister Apisak Tantivorawong. 
Yunyong Thaicharoen, first executive vice president and head of SCB’s EIC, says: “Thai export growth is expected to slow down in 2019 mainly as a result of uncertain trading conditions stemming from the US-China trade war.” 
The trade war damages the Thai economy in two ways, according to Don. First, Thai exports will falter as the country is part of the supply chain affected by the tariffs imposed by the two economic powerhouses. Second, uncertainty from the superpower conflict halts business expansions and investment. 
“Thailand is deeply entrenched in the global supply chain, and the tariffs imposed by the US on China will have a direct harmful impact on Thai exports,” concurred Matthew Circosta, an analyst for Moody’s Investors Service (Singapore). 
“China imports various Thai goods such as computer parts and integrated circuits, which they then develop and export to the US. The tariffs imposed by the US on Chinese goods targets electronic goods, and we have subsequently seen a sharp fall in Thailand’s exports of computer parts and integrated circuits to China,” said Don. 
For example, Thai exports of computer parts and integrated circuits to China fell by 18.4 per cent in October, according to the Trade Policy and Strategy Office of the Commerce Ministry. 
“The key threat from the trade war is the uncertainty that comes with it and its impact on investors and businesses,” said former World Trade Organisation chief, Supachai Panitchapakdi. 
“Investors are holding off their investments, exporters are unsure about the prospects for their businesses, and manufacturers are holding off expansionary plans in Southeast Asia as they wait to see whether the 90-day halt will lead to a settlement of the conflict,” Don added. 
The Federation of Thai Capital Market Organisations’ (Fetco) Investor Confidence Index (ICI) reported in November that investor confidence was expected to fall from November this year through to the beginning of 2019 by up to 7.23 per cent, down to 113.73 points from 125 in October. 
“This is mainly due to the uncertainty caused by the trade war. Investors are concerned about the extent to which US and Chinese manufacturers can cope with the rising tariffs, as well as the impact on Thai manufacturing and exports,” said Fetco chairman, Paiboon Nalinthrangkurn. 
“The trade war will likely escalate in 2019 as Trump loses control of the House of Representatives after the midterm elections,” warned director of the Thailand Development Research Institute (TDRI)’s Economic Intelligence Services (EIS), Kirida Bhaopichitr. 
Kirida explained that this was because Trump was likely to use the trade war to increase his approval ratings from his previous supporters, which are mostly low-income earners.