Baht hits high-value products

High-value industrial products with few imported raw materials such as rubber products, canned and processed seafood, gems and jewellery are expected to be the hardest hit as the baht strengthens, according to the planning unit of the Commerce Ministry.

Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office (TPSO), said the baht accelerated quickly to 32-33 per US dollar, compared with 35-36 baht per dollar in December last year.

He said although the extent of the impact of the baht's appreciation on export performance is not on par with the effect of a weak global economy and economic slowdown in key trading partners, a strong baht directly affects the competitiveness of Thai products, making them more expensive than those of other exporting countries.

The export value is also subject to a reduction once converted from the US dollar, resulting in a decline in revenue or profits for exporters.

Mr Poonpong said industrial products expected to feel the pinch from a stronger baht are mainly those with high export value, but low imported raw materials. Products such as rubber items, canned and processed seafood, gems and jewellery rarely enjoy low import costs, he said.

"The baht's volatility is unpredictable and uncontrollable," said Mr Poonpong. "The best strategy for Thai entrepreneurs is to prudently manage and hedge against foreign exchange risk."

He said the baht's gain positively affects imports, particularly of energy, capital goods, raw materials and semi-finished goods.

Semi-finished goods account for 83.8% of total imports and a more robust baht reduces the costs of such imported products to make finished products for re-export, said Mr Poonpong.

The office has not recorded any signs of a flood of imported finished consumer products, he said, though it will continue to monitor trade flows.

In a related development, according to a recent TPSO study, Thailand's beauty and personal care products both in the domestic and overseas markets are expected to have promising prospects this year, driven by growing consumer self-care and efforts to reduce stress.

The office estimated the domestic market for colour cosmetics at $811 million (26 billion baht) in 2022, up 12.1% from the year before, with an outlook for $896 million (28.7 billion baht) this year.

Outbound shipments of beauty and personal care products tallied $3.25 billion (113 billion baht) in 2022, up 6.6% from a year earlier. Key export markets include Japan, the Philippines, Vietnam, Australia and China.