Despite the weakening baht, the Thai National Shippers’ Council (TNSC) expect export value to contract by at least 8 percent in 2020, with a possible of double digit contraction looming.
TNSC’s prediction is in line with that of the Bank of Thailand (BOT) and the Center for International Trade Studies at the University of the Thai Chamber of Commerce (UTCC), which expects exports to contract by 7-8 per cent this year. If true, this will be the sector’s worst performance in a decade.
Thailand export value contracted by 2.7 per cent to US$246.25 billion in 2019. The UTCC expects that number to come down to $228.82 billion in 2020, which means that the coronavirus outbreak could take away $17.42 billion (557.72 billion baht) from Thai export value this year.
TNSC’s Chairperson Ghanyapad Tantipipatpong said the predictions were based on the baht, as it sat at 30.5 baht per US dollar. The currency was trading at 32.8 baht per US dollar on Tuesday morning compared to around 30 baht at the end of 2019.
“The TNSC concur with the MPC’s prediction that exports will contract by 8 per cent this year,” she said on Tuesday while referring to the BOT’s Monetary Policy Committee. The central bank also expect the Thai economy to contract by 5.3 per cent in 2020 based on the same export prediction.
Exports declined by 4.47 per cent to $20.6 billion in February. In comparison, January saw an unexpected expansion of 3.35 per cent year-on-year. Excluding gold, oil and arms being transferred by to the US after the Cobra Gold military exercise, Thai exports actually expanded 1.51 per cent in February.
For the first two months, exports slightly fell by 0.81 per cent to $40.3 billion when compared to the same period last year.
TNSC said factors that are affecting Thailand’s exports include supply chain disruption where the slowdown in imports is also another huge indicator for the interruption. Imports declined by 4.3 per cent to $16.7 billion in February.
Imports declined by 6.32 per cent to $37.93 billion in the first two months of 2020 in comparison to the same period in 2019.
“An import contraction of 5-6 per cent indicated that there is no economic activity in the country,” Tim Leelahaphan, a Thailand economist at Standard Chartered Bank, told Thai Enquirer.
Ghanyapad added that the lockdown policy in many countries is leading to a decline of demand for both essential and non-essential goods from abroad, as purchasing power are falling everywhere.
Apart from supply chain disruption, there is also a logistic disruption globally and in Thailand from land, air and sea. For example, shipping time is taking longer due to screening and there are less workers with more cargo being stocked up at ports. The delay is wracking havoc to the quality of fresh products, such as fruits, Ghanyapad explained.
For air freights, many airlines are temporarily out of operation, which is adding more cost for freighters. On land, borders between neighboring countries are being shut down as they are temporarily closed for 14 days. Border trade value is now declining by 60 billion baht per month or 2 billion baht per day.
The ongoing worst drought in 40 years is also sapping out agriculture outputs. Exports of agricultural and agro-industrial products declined by 3 per cent to $3.07 billion in February. The drop also led to the decline in the export of rice (-26.6 per cent), all types of fruit (-16.2 per cent), cassava products (-11.1 per cent), and sugar (-3.8 per cent).
The TNSC urged to the government to avoid a 24-hour curfew to support logistics within the country and accelerate its investment on transportation projects in preparation for the return of demand once the outbreak subsides.
