[Update] Exports set to shine in 2022 but outlook for 2023 looks bleak amid slowing demand and higher base

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Exports, one of the only factors that drove the economy during the 1st half of this year, is set to continue to remain vibrant during the course of the 2nd half of the year as weaker Thai Baht and demand shift is likely to continue although the sector’s future outlook in 2023 looks a little bleaker.

Exports, which registered 12.7% increase during the first six months of 2022, is likely to see the pace of growth slowing in the 2nd half of the year due to stronger base in 2021 but overall, the target would be to achieve a 10% growth for the entire 2022.

Chaichan Charoensuk, chairman of the Thai National Shippers’ Council (TNSC), said that Thai exports showed signs of improvement in the second half of the year, which has led the TNSC to revise its 2022 export forecasts from its original figure of around 6-8% rise.

“I am confident that the minimum will be 6-8% for sure, and I will try for 10%, which will have to look at the clarity in the second half, but the double-digit is possible,” Chaichan said.

The Thai exports expanded in the 1st half (January-June 2022), Thai exports were valued at US$ 149.18 billion, an increase of 12.7%. However, the value of imports rose to US$ 155.44 billion, an increase of 21%, resulting in a 6-month trade deficit of US$ 6.26 billion.

TNSC expects that exports in the second half of the year (July-December) can still grow at 7% under the assumption that the Baht would value at 34-36 Baht per US dollar, while oil prices could be at US$ 100-115 per barrel, and the shortages in the semiconductor shortages would likely ease by Q4 and help automobiles return as the main export product.

2023 a Tougher Year

Although 2022 export numbers are likely to be strong, the numbers in 2023 could be disappointing, economists warned.

“This year the numbers are looking good but for next year the export data will not be as rosy,” Amonthep Chawla, head of research at CIMB Thai Bank Plc.

Exports in 2023, he said would not be as rosy due to many factors such as the stronger Thai Baht, which could head back to around 34 to the US$ from the current 36, while the global economic situation, which continues to remain volatile, could see many of the export destinations becoming entrenched in recession.

With the United States already in 2 consecutive quarters of negative growth, the European Union facing a bigger economic slowdown than other markets, and the slower pace of growth in China, the export markets for Thailand’s goods are likely to shrink.

“Tourism is likely to be the only saving grace for economic growth in 2023,” he said as Thailand could return to 20 million tourists by the end of 2023 from 429,000 in 2021 and expected 6-10 million by the end of this year.

His comments were echoed by Pipat Luengnaruuemitchai, chief economist at KKP Phatra, who in a note to his clients said that there were ‘downside risks’ to the exports going into 2023.

“Despite continued strong export growth, downside risk remains to export growth, as major economies are expected to slow down the road. Tourism recovery in 2023 may also be slower than expected if the global economy enters a recession scenario,” he said.

Adding that the domestic economy should continue its recovery path from a low base, but the higher cost of living would likely cap the pace of recovery.

[Update] Real Sector

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) on Wednesday revised up its exports prediction from 5-7% to 6-8% for 2022.

Payong Srivanich, the chairman of the Thai Bankers’ Association (TBA) and the current chairman of the JSCCIB, said that the International Monetary Fund has downgraded its projection for the global economic expansion in 2022 but representatives of the private sector in Thailand still believe that Thai exports will continue to grow this year.

He said the private sector’s main concern right now is rising inflation in Thailand and they expect the headline inflation to be around 5.5-7% in 2022, up from their July projection of 5-7%.

The JSCCIB also maintained its GDP prediction for 2022 at 2.75-3.5%, based on the expectation that around 7-8 million foreign tourists will visit Thailand this year.

Thailand Export Markets on the First Half of 2022

During the 1st half of 2022, Thailand’s major export markets continued to grow well in many markets following the continuation of orders from trading partners amid the pressure from global economic conditions that are at risk from the effects of the prolonged conflicts in Ukraine and accelerating inflation.

As of now, only exports to China and Japan remained uncertain due to the sluggish economy in the country as they maintain strict Covid-19 epidemic control measures. China, which has lately been one of the key economic drivers of growth for the region and the world recorded a 0.4% growth in its gross domestic product (GDP) during the 2nd quarter of this year. Official forecast for the entire 2022 GDP growth for China is set at 5.5% although during the 1st half the country only achieved 2.5%.

This is likely to impact the export segment of goods from Thailand.

Thailand’s Ministry of Commerce has therefore categorized China in the so called ‘Primary’ market along with the likes of United States, the 5 Asean countries, Europe and Japan.

The “secondary market” consists of South Asia, Australia, the Middle East, Africa, Latin America, Russia, and the CIS; and “other markets” includes the markets such as Switzerland.

Primary Market

The main market during the 6-month period grew 11.5% or valued at 103.943 billion US dollars, continually expanding in the following markets:

  • U.S. market 20.5% worth 24.004 billion US dollars.
  • ASEAN market (5) 25%, valued at US$ 21.521 billion, with Thailand exporting to Malaysia the highest, valued at US$ 6.435 billion or a 9.8% growth, followed by Indonesia, an increase of 38%, with a value of US$ 5.623 billion.
  • CLMV market 9.9%, valued at US$ 15.773 billion, with Thai exports to Vietnam the highest, valued at US$ 6.71 billion, expanding 0.1%, followed by Cambodia, valued at US$ 4.21 billion, expanding by 21%.
  • EU market (27 countries) grew 10.4% with a value of US$ 42.030 billion.
  • China market, due to the Chinese government still has the zero-covid policy and has not opened the border as well as the domestic economic problems within the country, resulting in 6 months of Thai exports to China worth only US$ 18.453 billion, an increase of 0.8%.
  • Japan market, another market that Thailand exported during the past 6 months, the total value decreased to US$ 2.714 billion or only 1.4% growth.

Secondary Market

The overall secondary market grew 42.030 billion USD or 10.4%, expanding in the following markets:

  • South Asia market US$ 7.301 billion, or a growth of 35.7%, with Thailand exporting to India up to US$ 5.606 billion or 46.6%, while the negative export market is Hong Kong, which is worth US$ 5.547 billion or a contraction of 1.9%.
  • Australia market grew negative 3.2% or a value of US$ 6.503 billion.
  • Middle East market grew by 21.5% or valued at US$ 5.279 billion, with Thai exports to Saudi Arabia growing by 10.8% or valued at US$ 934 million.
  • Africa market grew 5.1% or US$ 3.362 billion.
  • Latin America market grew by 9.4% or US$ 4.648 billion.
  • Russia and CIS markets saw a negative growth of 34.4%, valued at US$ 396 million, with Thailand’s exports to Russia dropping 36% or US$ 292 million.

And other markets grew by 205% or valued at US$ 3.210 billion, expanding to 319% or valued at US$ 2.776 billion.

Products that saw an increase demand

  • U.S. Market saw an expansion of demand for products such as computers and components, transformers and components, air conditioners and components, and aluminum products.
  • ASEAN market (5 Asean countries) saw demand rise for products such as aircraft and components, refined oil, gems and jewelry, sugar, automobiles, equipment and components, etc.
  • CLMV market saw demand for products such as refined oils, gems and jewelry, refined sugar, vegetable and animal fats oils, and plastic pellets.
  • EU Market (27 countries) saw commodities expand include components, computers and accessories, iron, steel and iron products, processed chicken, and gems and jewelry.
  • South Asia market saw demand rise for commodities including vegetable and animal fats oils, gems and jewelry, chemicals, aluminum products, and air conditioners and components.
  • Australia market saw expansion for aerospace and components, gems and jewelry, cosmetics, soaps and skin care products, and plastic products.
  • Middle East market saw demand for commodities expand including rice, automobiles, equipment and components, air conditioners and components, wood and wood products, and gems and jewelry.
  • Africa market saw expansion in automobiles, equipment and components, rice, wood and wood products, canned and processed seafood, and chemicals.
  • Latin America market saw expansion in automobiles, equipment and components, radio receivers, televisions and components, electronic circuit boards, computers, equipment and components, and transformers and components.

Shrinking Products Demand

  • China market saw a contraction in automobiles, equipment and parts, chemicals, motorcycles and parts, etc.
  • Japan markets saw a contraction in automobiles, equipment and components, chemicals, and machinery and components.
  • Russia and CIS market saw a contraction in automobiles, equipment and components, rubber products, refrigerators, freezers and components.

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