Exports projected to see steep decline in 2009

The world's economic meltdown will turn Thailand's exports from a bullish 2008 into a bearish 2009 as most industries foresee a gloomy aspect with their exports.

Thai exporters will face many negative export factors this year through the global economic recession. Both the US financial crisis and the world's economic recession will directly hit Thailand's trading partners, in particular traditional markets including the United States, the European Union and Japan, which are now entering recession.

Also, the global financial crisis has prompted commercial banks to be very careful about approving credit lines to traders.

Despite having a new government, the political turmoil has not settled. In addition, the closure of the airports last year damaged confidence in Thai exports.

According to the World Bank, the global economy will grow by only 1 per cent in 2009 instead of the 2.6 per cent forecast. Economies in the Organisation of Economic Cooperation and Development (OECD) countries will drop by 0.2 per cent rather than increase by 3.2 per cent, while non-OECD countries are projected to grow by 3.2 per cent in 2009 from 4.6 per cent expansion in 2008.

The International Monetary Fund says Thai exports to the US, the EU and Japan, which account for 34 per cent of Thailand's export value, in 2009 will decline in value by 0.7, 0.5 and 0.2 per cent respectively.

However, there are some positive factors to compensate for shrinking exports, including the possible depreciation of the baht, continued economic growth in new target markets like Eastern Europe, the Middle East and countries in Asia, and lower oil prices, which have lightened production and logistics costs. Yet nobody knows when oil will climb again following higher demand in Western countries, China and India.

Slowing export growth affects not only each industry but also the Kingdom's economy as a whole as exports account for more than 65 per cent of the country's GDP. Sluggish exports can cause companies to shut down operations and will lead to lay-offs.

A survey by The Nation of each export sector regrettably comes to the conclusion that there will be no sunrise industries in 2009, but only fast and slow "sunset" industries.

The best possible result each sector can expect is that it will expand by a few percentage points. Most companies will see flat export performance, and some will see exports drop.

Rice

Despite ranking among the country's top seven export products and robust growth in 2008, Thai rice exports are forecast to drop 15 per cent in volume to only 8.5 million tonnes in 2009. Rice export value is expected to drop by 20 per cent from 2008's value following lower agricultural-goods prices.

The rice price is likely to drop as higher supply and the high cost of rice under the Somchai government's intervention programme created difficulties for Thai rice exports.

World rice trade is forecast to drop by 2.81 per cent in 2009 from 29.07 million tonnes to 28.25 million tonnes due to high stockpiles.

Thai Rice Exporters Association president Chookiat Ophaswongse said that many rice-exporters would "take a long vacation" in 2009 due to low purchasing orders. The high cost of Thai rice will also create difficulty for Thai rice exports as many rivals like Vietnam and India have lower prices.

Processed and frozen foods

The sector seems to face the minimum impact from the world's economic crisis due to being essential goods. However, the sector is also expected to see zero growth in 2009 due to high export value in 2008, which is expected to reach Bt670 billion.

Poj Aramwattananont, president of the Thai Frozen Foods Association, said that due to the world crisis, consumers would lower consumption. Product value is also expected to drop in 2009 as consumers buy lower-priced goods.

The market will continue to impose higher standards for food safety, which will increase costs for Thai manufacturers.

Garments and textiles

This sector, which has about one million jobs, is expected to see sluggish growth of zero to 5 per cent, the worst figure in a decade.

Normally, exports from the sector are expected to grow by 10 per cent a year. But even though the industry is affected by the financial crisis, the sector is forecast to come in with 9- to 10-per-cent export growth for 2008 to $7.6 billion.

Vallop Vitanakorn, vice president of the Thai Garment Manufacturers Association, said: "Under the best-case scenario, exports will grow by only 5 per cent, while in the worst case we could see zero growth in 2009."

Some small and medium-sized manufacturers may have to close down. However, large enterprises that have adjusted to producing brand-name products and high-quality goods to serve the high-end market will enjoy good purchasing orders.

The sector is not expected to have to lay off workers, because there is still strong demand for sportswear, children's wear and underwear thanks to the Kingdom's reputation for quality goods.

Electronics, electronic parts and electrical appliances

The world's economic meltdown will bring down demand for durable goods in all markets.

Katiya Greigarn, chairman of the Federation of Thai Industries Electrical, Electronics and Allied Industries Club, said that exports in the sector were expected to see flat growth in 2009 from last year's 6-7 per cent expansion to Bt1.6 trillion export value.

"The 'hamburger crisis' has lowered buyers' confidence. Exports to all markets, including the US, the EU, China and Asean, will face sluggish expansion in 2009," he said.

Hard-disk drives and integrated circuits will also experience a drop in export growth due to investment shifts to other countries, such as Taiwan.

Automobiles and auto parts

Following the slowdowns in the US and EU car industries, Thailand's automobile and parts exports are forecast to plunge dramatically by 5-20 per cent in 2009, from an increase of 12 per cent to between Bt500 billion and Bt550 billion in 2008.

Paiboon Poocharoen, honorary chairman of the Automotive Industry Club of the Federation of Thai Industries, said: "It will be a tough year for exports, as most of our traditional markets, including Australia, Africa, Asia and the EU, will have low capacity for imports. Exports to the Middle East will also see slow growth in 2009 due to the decreasing oil price."

Gems and jewellery

This industry's export income grew 46.4 per cent to US$7.2 billion (Bt252 billion) in the first 11 months of 2008. However, exports started to show slowing growth in December, a trend that is likely to continue through the first half of 2009 due to the world's economic meltdown.

"Due to the widespread economic crisis, we are very worried about sluggishness this year," said Vichai Assarasakorn, president of the Thai Gems and Jewellery Traders Association, adding that the best outcome for 2009 would be to maintain export value the same as in 2008.

Exporters are facing two troubles: lower demand from consumers and problems of financial liquidity. However, Vichai is optimistic that exports from the sector may increase in the second half of 2009 if the US economy is recovering.

Furniture

Thai furniture-makers will continue to suffer from tough competition and the US financial crisis, said Jirawat Tangkijngamwong, secretary-general of the Federation of Thai Industries' Furniture Industry Club.

Exports in 2009 are expected to see flat growth, as they did in 2008. Furniture exports dropped slightly (by 2.3 per cent) to $1.16 billion in the first 11 months of 2008, while it was earlier estimated that export could grow by 3 per cent.

To strengthen their export competitiveness, manufacturers are adjusting themselves to produce brand-name products and superior design. Producers in the sector are also trying to penetrate new markets, including India, Russia, Australia, the Middle East and Eastern Europe to offset export drops in traditional markets.

Due to the slump in export growth, alien and unskilled labourers will be the first groups to be laid off. Some small and medium-sized producers who rely too much on made-to-order contracts will also shut down.

Toys

Like many other groups, toy-makers are expected to face flat export growth in 2009 because of sluggish demand in the US, Thailand's major export market, said Thai Toy Industry Association president Duangjai Koosrivinij.

However, amid the crisis, there is an opportunity for Thailand because its main rival in the field, China, faces problems of product safety.

The recall of toys from China was one factor leading to the Thai industry's exports expansion of 20.5 per cent to $233 million in the first 11 months of 2008. However, export orders started to drop as the financial crisis deepened, and at the end of the year exports had increased by only 17-18 per cent.