Exporters cautioned as headwinds mount

Thai exporters are being warned to brave the China-India conflict and the tech war between the US and China on top of the existing serious impact from the coronavirus crisis.

Aat Pisanwanich, director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce, said the business sector is fretting over the looming trade war between China and India, which has already banned 59 China-made apps including TikTok; the US-China trade spat that is developing into a technology war; frenetic currency swings; and tightened human rights regulations.

"Technology wars may adversely affect Thai business operators, as many companies use China-made applications to run their business," Mr Aat said. "If China-made applications are banned, Thai businesses will be inevitably hit."

The government is hence being urged to speed up working out plans to help the business sector that may feel the pinch from such threats in the future, be it through low interest-rate loans to Thai companies to upgrade machinery and improve their operations; tax incentives to employers that hire workers; active sales campaigns both in and outside the country; domestic consumption and investment stimulus; or tax breaks for companies and individual taxpayers.

Mr Aat said local operators should adjust their business to tap into the online channel, use cost-sharing clusters to reduce production costs, promote domestic market expansion through sales campaigns, and work on labour skill development and packaging improvements.

The Center for International Trade Studies said last Wednesday that Thailand's exports are likely to shrink by as much as 13.5% this year, the worst showing in a decade, if a Covid-19 vaccine is not available this year.

The forecast is predicated on a global economic contraction of 5%, the baht trading at 31 to the US dollar, a second and third wave of Covid-19, crude oil prices at US$40 a barrel, a Thai GDP contraction of 7.7%, and a technology war between the US and China.

Mr Aat said Thailand's exports in the second half of the year are expected to contract more than in the first half because the overall economy remains bearish, projecting a decline of up to 19.8% year-on-year.

A tepid global economy, the widespread outbreak with no vaccine, the tech war between the US and China, frenetic currency swings and tightened human rights regulations are factors.

Other risk factors in the second half include weaker economies among trade partners, declining import demand, low oil prices and lockdown measures.

For the first half, according to the Commerce Ministry's data, Thailand's exports fell 7.1% from the same period last year to $114 billion, while imports dropped 12.6% to $104 billion, resulting in a trade surplus of $10.7 billion.

Mr Aat said the university estimates the Covid-19 crisis to cause a loss in Thai export value of $13.6 billion-$33.2 billion this year.

The automobile and parts industries are the worst-hit sectors, followed by electric appliances, plastic pellets, fuels and chemical products.