Processed food exports are forecast to drop by 5% this year, hit by weak demand in Europe and the United States and higher production costs at home.
The higher expenses stem from the nationwide daily minimum wage hike and recent baht gains.
Ghanyapad Tantipipatpong, president of the Thai Food Processors' Association (TFPA), said processed food exporters, particularly small and medium-sized enterprises, are mostly incapable of adjusting their business to cope with sharp baht gains.
"Large companies will be slightly affected, as most of them are believed to have hedged against foreign exchange risk," said Ms Ghanyapad.
"However, should the baht strengthen to 29 to the US dollar, the impact would definitely hurt the competitiveness of Thai processed food shipments."
She said the TFPA must seek help from the Finance Ministry if the baht continues to gain.
"We hope the baht appreciation, which is being driven by capital inflow for speculation in the Thai capital market, will be short-term," said Ms Ghanyapad.
The TFPA estimates processed food exports totalled 160 billion baht last year, on par with 2011 figures.
This year, the exports are expected to fall by 5%.
Demand from the key markets of Europe and the US will remain limp, as their economies have yet to recover fully, Ms Ghanyapad added.
Srirat Rastapana, director-general of the International Trade Promotion Department, also expressed concern about the stronger currency.
The department, under the Commerce Ministry, will monitor currency trends closely and their effect on Thai exporters, she said, adding that the central bank should "pay close attention" to the issue.
"The department has set up a centre to monitor the currency's movements and appraise the impact on the competitiveness of Thai exports," said Mrs Srirat.
But she believes the impact will be marginal since other regional currencies have also gained sharply.
Somphob Manarungsan, an economist and rector of the Panyapiwat Institute of Technology, said the stronger baht will affect not only commodities exporters but also manufacturers in labour-intensive sectors such as garments, textiles and electrical appliances."Exporters must adjust their business strategy to cope with the baht's gains. The baht may continue to appreciate, as fund flows will likely continue into Asean, particularly Thailand," he said.
About the author
- Writer: Phusadee Arunmas
Position: Business Reporter