Tuesday, January 28, 2014

Business As Usual For Thai Exporters

Thailand's December trade data due this week is unlikely to lift the public mood. Export growth is expected to remain soft at 1.2% on-year while the trade balance will probably remain in the red with a deficit of about US$1 billion.
That means overall export growth was pretty much flat for 2013. Coming into 2013, exporters were very upbeat about the global growth prospects. The disappointment that followed led to the slide in capacity utilisation.
On sequential terms though, export growth has definitely picked up in the December quarter. Exports expanded by an average of about 1.0% on-month in the period, up from the 0.3% average contraction seen in the previous three quarters. At the current rate, export growth may recover to about 8% on-year in 2014. This is made possible by the anticipated improvement in global growth. We expect a slight uptick in GDP growth in the US. The Eurozone is recovering, even if at a gingerly pace. And consumption growth in Asia remains supportive, offsetting the slight drag we may see from Japan this year.
So, what about the impact from the current political deadlock? Most of the industry zones are situated outside of Bangkok. As long as there is enough demand, it will probably be business as usual. Any drag is likely to come from falling confidence among local businesses. Even then, any downside from the political deadlock is likely to be limited. Thailand still has a competitive edge compared with most of its neighbouring economies, especially in manufacturing.