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Thai exports could drop 0.6% in 2019

The University of the Thai Chamber of Commerce predicts that Thai exports in 2019 will drop 0.6% year on year, the first contraction in four years.

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Dr. Aat Pisanwanich, Director of Center for International Trade Studies (CITS) of UTCC, said that total Thai exports this year are expected to reach USD251.338 billion, 0.64% less than last year and the first contraction in four years.

Nonetheless, CITS predicts that Thai outbound shipments in the second half of this year will expand 1.6%, totaling USD128.367 billion, driven largely by the government’s stimulus measures.

To maintain export growth, the value of Thai exports in the remainder of this year must increase at least 2.9% per month, or USD21.664 billion monthly, he added.

Risk factors in the second half include the slowing global economy, an escalating trade war between the US and China, BREXIT, a stronger Baht as well as a possible minimum wage increase

Dr. Aat Pisanwanich, Director of Center for International Trade Studies (CITS) of UTCC

He added that every one-percent increase in minimum wage will lower exports by 0.06%. The proposed minimum wage hike to Bt400 per day is a 30% increase and it could lower Thai exports by 1.8% or by USD4.524 billion.

The Thai Baht has also strengthened, reaching Bt31.60 per US dollar in the first half of this year. It is expected to stay at around Bt30-Bt31 per US dollar this year.

With further US rate cut, the Thai Baht may continue to strengthen

If the US Federal Reserve decides to cut the fed funds rates during the meeting this week, the Thai Baht may strengthen further, reducing the competiveness of Thai exports

Dr. Aat Pisanwanich, Director of Center for International Trade Studies (CITS) of UTCC

The export items seriously affected by a strong Baht are automotive products, electronic parts, rubber and electrical appliances.

He said that the recently-signed free trade agreement between Vietnam and the European Union may also put Thai exports at disadvantage in the EU market.

If the agreement comes into effect in the second half of this year, Thai exports may suffer to the tune of USD680 million. Exports likely to be affected include textiles and apparel, machinery and parts as well as electronics and parts.

If Washington decides to impose additional tariffs on another USD325 billion worth of Chinese goods, and if Beijing retaliates by imposing tariffs on USD60 billion of the US imports, the trade war will escalate. Based on this scenario, Thai exports in 2019 could possibly shrink by 2.6%, Dr. Aat said.

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