Export forecast revised down over global uncertainty
Business leaders yesterday slashed their projection for this year's exports, but maintained the country's economic growth forecast on anticipation that the robust tourism sector and accelerated public spending would offset bleak outbound shipments.
This year's exports are expected to register anywhere from a flat growth rate to a 2% decline, down from flat growth to a 2% rise projected earlier.
The revised forecast comes as a number of challenges affecting the global economy could affect orders for Thai merchandise, said Predee Daochai, chairman of the Thai Bankers' Association and chair of yesterday's meeting of the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).
The global economic challenges will also cause exports to take longer to recover, he said.
According to the Ministry of Commerce, exports slipped for a second straight month in May, which has been attributed to a slowdown in the global economy and low prices for agricultural products and oil.
The Commerce Ministry said exports fell 4.4% year-on-year in May to US$17.6 billion, a 1.9% decline over the first five months of 2016 to $87 billion, with imports edging up 0.5% last month to $16 billion.
Vallop Vitanakorn, vice-chairman of the Federation of Thai Industries (FTI), added that weaker exports are expected to have an adverse impact on several industries as they slow down in line with global demand, including automotive and parts and electronics, whose overseas orders started to slow down in the second half of this year as buyers held back orders.
"The export market accounts for around 37% of total production in the electronics and electrical industries. The slowdown in orders in these sectors will mean a drop in production," said Mr Vallop.
Automotive and parts has also been affected by the economic slowdown and falling orders, he said.
The joint private sector committee expects automotive exports to drop by 4% this year, due largely to falling orders from the Middle East, one of Thailand's major auto export markets.
Mr Vallop said changes to auto specs and regulations, which aim to reduce the amount of CO2 emissions from old cars, have forced local car dealers to sell off their own stock before ordering upgraded models from Thailand, resulting in a slowdown in orders from the Middle East.
Thai auto exports to Indonesia also dropped as customers held back orders due to weak demand, he said.
For electronics and electrical industries, the FTI projects a 5-6% drop in these sectors this year.
FTI chairman Chen Namchaisiri, however, said he is still optimistic about the resiliency of the Thai economy and expects to see a gradual recovery in the second half, although the global economy had yet to fully recover.
"Although the global economic outlook remains poor, there are still a lot of government projects that are likely to help boost the economy, including the mega-infrastructure projects, the acceleration of the government budget disbursement and plans to promote tourism," said Mr Chen.
He noted the joint committee had also set up a subcommittee to study the pros and cons of Brexit and its possible impact on trade, business and investment between Thailand and Britain in the long run.
Although it has been assessed that Brexit's impact on the Thai economy would be minimal for the rest of this year as trade and investment value between the two states remains small, Brexit has dented economic confidence and caused global financial volatility.
Mr Predee said further monitoring of negotiations between Britain and the EU would be needed.
It was assessed earlier that Brexit could shave off 0.1 percentage point from Thailand's economic growth in 2016, with vulnerable exports to Britain consisting of processed chicken, automobiles, and gems and jewellery, said Thanavath Phonvichai, director of the Centre for Economic and Business Forecasting at the University of the Thai Chamber of Commerce.
Tourism destinations such as Phuket and Koh Samui may also welcome fewer UK travellers in the upcoming high season, said Mr Thanavath.
"Despite a slight downward revision in our export projection, there are several positive factors [for the Thai economy], therefore we have maintained our GDP growth forecast at 3-3.5% [for this year],"said Mr Predee.
These positive factors were identified as public expenditure, tourism expansion, a pickup in private consumption and higher auto sales for two months running, he said.
The JSCCIB is also pleased that Thailand has been upgraded to a Tier 2 status in the US's Trafficking in Persons Report 2016, as this development bodes well for the country's seafood industry, which has struggled with issues related to illegal, unreported and unregulated fishing, said Mr Predee.
Separately, he said the language used in Kasikornbank's contract for the PromptPay money transfer service has been revised, as an earlier version had created the impression the bank might not protect customers in cases of e-money hacking.
"Simply put, customers of commercial banks who have done nothing wrong do not have to worry about losses [related to PromptPay service]," he said.