Minimal harm to GDP seen from trade tiff

Minimal harm to GDP seen from trade tiff

FPO weighs pros, cons of US-China dispute

Cargo ships are docked at Bangkok port in Klong Toey district. PATIPAT JANTHONG
Cargo ships are docked at Bangkok port in Klong Toey district. PATIPAT JANTHONG

The tit-for-tat trade dispute between the US and China is forecast to have a net negative effect on Thai economic growth of a mere 0.03 percentage points, says a source at the Finance Ministry with knowledge of the Fiscal Policy Office's estimates.

An FPO study found that the US-Sino trade dispute would entail pros and cons for the Thai economy, the source said.

The trade conflict will take a slight toll on Thailand's exports bound for China, shaving 0.11 percentage points off Thai GDP growth, the FPO estimated.

The row will also create opportunities for Thailand, however, as Chinese investors may use the Southeast Asian country as a host for production and export to the US to avoid tariffs.

Thai GDP growth will gain 0.08 percentage points in the event that the country is picked by Chinese investors to make products destined for the US, the Finance Ministry's think tank predicts.

Based on these scenarios, the trade spat will hit Thai economic growth to the tune of 0.03 percentage points, net, if the rift does not worsen into a full-blown trade war.

The source said the dispute presents an opportunity for Thai farm products, including animal feed and pork, to replace Chinese exports to the US.

Thailand's outbound shipments at the moment are diversified, with 25% to Asean countries, 12.4% to China, 11.2% to the US and 9.4% to Japan.

The FPO has forecast that Thailand's GDP will grow by 4.5% this year. But Finance Ministry spokeswoman Kulaya Tantitemit said recently GDP growth of 5% is possible if the global economy's performance and state spending outstrip expectations.

Somprawin Manprasert, chief economist and executive vice-president of Bank of Ayudhya, earlier estimated that the net effect from retaliatory tariffs between the world's two biggest economies would be a modest gain for Thai GDP.

Thai intermediate goods manufacturers along China's supply chain, including electrical machinery and equipment and electronics and computers, are expected to feel the pinch from the widening trade spat.

Moreover, Thailand could become a dumping ground for certain products from the two giant economies.

As for winners, Mr Somprawin forecast that Thailand's agricultural sector, including cassava, fruits, rice, seafood and meat, could take advantage of the trade tiff, as China would shy away from importing these items from the US.

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