Export high owes itself to good luck
Although Thai exports rose to a four-year high last month, it’s still too early to pop the champagne. There remain many challenges ahead for the market. After all, it wouldn’t be a stretch to say that exports rose largely due to luck. The rise in exports can be largely attributed to external factors — namely, the recovery of the global economy, which Thailand wields little to no control over. The latest export figures might also look particularly impressive due to the low-based numbers in the corresponding period of last year. At the time, export figures were markedly low due to global uncertainties over the outcome of Brexit and the US presidential election.
Last month, Thai export figures leaped to 13.2% on a year-on-year basis to US$19.9 billion (676 billion baht), the highest figure in over four years.
However, this does not necessarily mean that Thai exporters have strengthened their competitive edge, an essential element for sustainable growth.
On Thursday, the Commerce Ministry said that the rise in exports last month was well above the 8.4% growth recorded in April, driven by increases in demand for several products.
The Bank of Thailand is now optimistic about the trajectory of the economy, projecting that the country’s merchandise exports will grow to 2.2% and the GDP to 3.4% this year.
The 52-month high in export figures may be deceiving, however, as it was largely determined by low-based effects. Exports in May of last year totaled only $17.6 billion, making the rise seem quite significant by comparison.
The latest international trade figures shows the global economy is experiencing a turnaround. Despite global business players initial concern about Brexit and the US election at this time last year, these events seem to have not severely affected business confidence as was feared by many.
As people regain economic confidence, the Thai government has embarked on a marketing campaign by organising roadshows for key markets like the US, Asean and China, as well as emerging markets in Russia and the Middle East.
Despite the buoyant figures, Thai exports will not necessarily face an easy road ahead
The effort has generated positive results so far, driven largely by bullish economic activities in the aforementioned countries. Exports to China rose 28.3%, and exports to five Asean countries — Malaysia, Indonesia, the Philippines, Singapore and Brunei — are up by 14.2%.
Shipments to South Asia rose by 18%, followed by a rise of 14.3% in the combined markets of Cambodia, Laos, Myanmar and Vietnam.
The economic performance of Thailand’s neighbouring countries is on the rise, helping bolster border trade.
But despite the buoyant figures, Thai exports will not necessarily face an easy road ahead.
Thai exporters have yet to provide niche products to stand out from other regional markets, meaning that importers have largely opted to buy merchandise based on the offering prices. This varies based on the currency figures of the country providing the exports.
The Thai baht is set to further appreciate in the second half of this year following an increase of five percent in the first half.
If the baht keeps appreciating like this, it could affect the cost competitiveness of the country’s exports when up against similar products from other exporting nations, especially those in the Asean region.
Meanwhile, the fluctuation of oil prices will continue to impact the confidence of the global businesspeople. Last week, oil prices rose after hitting a 10-month low, but the market remained negative due to the persisting global crude glut.
The pattern of Thai export items has not changed much from decades ago despite the government’s avid 4.0 economic campaign.
The bulk of Thailand’s top export items are still based in agriculture and basic industries. The Commerce Ministry reports that exports of industrial products has risen by 12.8% to $.15.6 billion, led by automobiles, computers and components, electric circuits and processed rubbers.
Unfortunately, innovative products and added-value products did not make up a significant portion of the total amount of Thai exports.
The Thai government has made a big campaign to usher in the 4.0 era, marking the economy’s move towards the digital age. However, the list of export items still show that the industrial sector has not made any improvement.
Examining the list of Thai export items also shows that industry has not progressed towards smart or value-added economies, as has been pushed by the government.
This rests despite the fact that Thailand’s ability to find its place in a niche market by exercising innovation and creativity is key for shaping a competitive future for Thai exports.