Weak baht helps some sectors
text size

Weak baht helps some sectors

Shipping containers are loaded onto an international freighter at the Bangkok Port. The baht depreciation makes Thai exports cheaper, but imported raw materials become more expensive. Arnun Chonmahatrakool
Shipping containers are loaded onto an international freighter at the Bangkok Port. The baht depreciation makes Thai exports cheaper, but imported raw materials become more expensive. Arnun Chonmahatrakool

The weaker baht is expected to boost the Thai economy and increase real GDP by 0.4%, but not all manufacturers will reap the benefits, says the Industry Ministry.

Industries such as steel, medicine and oil, which depend greatly on the import of raw materials and have few exports, will bear the brunt of the baht depreciation, said the ministry.

Manufacturers will experience varying outcomes as the value of the baht decreases, but overall the Thai economy will benefit, said Industry Minister Suriya Jungrungreangkit.

The baht fell to 34.46 against the US dollar on June 7, down from 33.38 baht on Dec 30 last year.

The depreciation has made Thai exports cheaper, but imported raw materials have become more expensive.

If the value of the baht weakens by 5%, real GDP will grow by 0.4%, said Thongchai Chawalitpichaet, director-general of the Office of Industrial Economics (OIE), citing a calculation based on a macro-econometric model.

Real GDP is a measure of economic activities, with prices adjusted for inflation.

With this rate of depreciation, the baht value of exports will grow by 2.14% while the value of imports will increase by only 1.94%, according to the findings.

Consumption will expand by 0.21% and investment will increase by 0.31% because manufacturers who benefit from additional exports will rack up higher revenue, according to the model.

But manufacturers with high imports of raw materials and low exports of products need to run their businesses cautiously as the value of the baht falls, he said.

"They need to adopt appropriate risk management to cope with currency fluctuations by making forward exchange contracts and foreign exchange options," said Mr Thongchai.

He also urged manufacturers to look for alternative sources of energy and raw materials to replace costly imports.

Industries including makers of electronic circuits, medical equipment and medicine can also be affected by baht depreciation, said Mr Thongchai.

Though this group of manufacturers exports a lot of products, they also depend greatly on the import of raw materials, he said.

According to the OIE, industries most likely to benefit from a weaker baht are those with a high proportion of exports and a low percentage of imports as they mainly use raw materials sourced from within Thailand. These include makers of canned fish and fruit, sugar, rubber, and some home appliances such as microwave ovens, irons and fans.

Industries with low amounts of both imports and exports will not be affected by changes in foreign exchange rates as they use domestic raw materials and mostly sell products in Thailand. These industries include office equipment, textiles and garments, and non-alcoholic drinks.

Do you like the content of this article?
COMMENT (6)