Thai Exports Threatened In Worst-Case Scenario

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BUSINESS

Thai exports threatened in worst-case scenario

By THE NATION

Bank of Thailand

BANGKOK: -- Some US$2.5 billion (Bt80.83 billion) worth of Thai exports could be affected in the worst-case scenario of the European crisis spreading to Portugal, Italy, Spain and Ireland, says the Centre for International Trade and Studies.

If the crisis is limited to Greece, the impact will be only $210 million. But if the crisis spreads only to Portugal, it will be $613 million.

"However, the most likely scenario will be the Greek crisis spreading to Portugal," said centre director Aat Pisanwanich, adding that the impact should be visible in the third quarter.

Aat also urged the Bank of Thailand (BOT) to monitor the baht's movement against the euro, which is now trading at 41-42. Every 1-per-cent appreciation will pressure Thai exports by 1.47 per cent.

If the baht touches 40.5 to the euro, that will reduce Thai exports to the euro zone by $270 million. If the baht appreciates to 40, it will reduce exports there by $540 million, he said.

Aat said the products that would be affected the most are auto and parts, air-conditioning, refrigerators, jewellery and ornaments, seafood and garments.

Meanwhile, the BOT predicts only a limited effect on the Thai financial sector, because lending to Greece amounts to only Bt340 million.

Krirk Vanikkul, deputy governor for monetary affairs, said Thai banks' total exposure - including loans and bonds - to foreign financial institutions was Bt280 billion, or only 2.8 per cent of the total assets. Loans to Greek companies total only Bt340 million.

"Of the total exposure - although we don't know how much of it involves Greek institutions - total loans amount to only Bt340 million, which is tiny and not worrisome," Krirk said.

The baht yesterday declined 0.2 per cent to 32.35 to the US dollar yesterday afternoon in Bangkok, data compiled by Bloomberg show.

Tohru Nishihama, an economist at Dai-Ichi Life Research Institute in Tokyo, told Bloomberg: "When the protests end, attention will be paid to the nation's economic condition and trade surpluses, which are positive for the baht."

He said the baht might move in the range of 32-32.50 to the dollar this month.

So far this year, the baht has strengthened 10 per cent against the euro, pushing the cost of exports to Europe.

Bank of Thailand Assistant Governor Suchada Kirakul said the dollar-baht movement had also been volatile on investors' growing concerns about the euro-zone debt crisis.

"The baht moved in a tight range in the past two days, due partly to the return of mature foreign investment. In the past four days, foreigners maintained their net-sell position, amounting to Bt18 billion. Parts of the fund remain in Thailand, but some have been exchanged for dollars," she said.

Suchart Sakkankosone, senior director of the BOT's Domestic Economic Department, said the European debt crisis was being closely monitored. Despite the commitment by the European Central Bank and the International Monetary Fund, measures remain unclear. It also remains in focus what the consequences could be if Greece defaults on debts, because it is a part of the euro zone.

Montree Socatiyanurak of National Institute of Development Administration said it was likely the Greek crisis, which could spread to Spain and Portugal, could spark inflows to Asian markets. This will strengthen the Asian currencies, including the baht. Thailand's export competitiveness will be affected, as well as the economy. Exports account for 70 per cent of gross domestic product.

"The crisis is not directly hitting Thailand, but the impact can be seen in the Thai stock market, interest rates, exports and exchange rates. The BOT will need to stabilise the currency, to minimise effects on export competitiveness," the lecturer said.

He believes under the circumstances, the central bank will not raise the policy rate from 1.25 per cent until the fourth quarter. The domestic political crisis and the euro problems will likely prevent Thailand's economy from growing 4.5 per cent this year as targeted.

Many houses so far believe the BOT will raise the policy rate at next month's meeting.

-- The Nation 2010-05-12

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[1plumber]

what are some examples of these exports..........save rice

[1plumber]

what are some examples of these exports..........save rice

I should have read the article closer sorry

[Robby nz]

total loans amount to only Bt340 million, which is tiny and not worrisome,"

Please could I have one of those tiny and not worrisome loans, or 10% or 1% even.

I will even promise to do like Greese and go broke and never pay it back.

[ptrk64]

what are some examples of these exports..........save rice/>

Auto parts, computer hard drives, refrigerators, AC units and food like chicken, prawns. And Norwegian farm raised salmon, sent to Thailand for packing and re-exported retail sale, love that one

Edited May 12, 2010 by ptrk64

[givenall]

what are some examples of these exports..........save rice/>

Auto parts, computer hard drives, refrigerators, AC units and food like chicken, prawns. And Norwegian farm raised salmon, sent to Thailand for packing and re-exported retail sale, love that one

May be now Bth will be lowered

[Demodokos]

I thought that political instability would make Thai Baht going down...

[Carmine6]

I think the article misses the bigger issue of a weaker Euro. The crisis in individual countries isn't likely to stop all trade to that country, unless it's the governments that are buying all those car parts and air conditioners. Are the people going to completely stop eating and living due to the government's problems? Might slow things down, but not wipe it all out.

But a weaker Euro could affect trade all over Europe. Start losing some percentage of the total and pretty soon you're talking real money.

[mccw]

what are some examples of these exports..........save rice/>

Auto parts, computer hard drives, refrigerators, AC units and food like chicken, prawns. And Norwegian farm raised salmon, sent to Thailand for packing and re-exported retail sale, love that one

and northsea prawns, sent for deshelling in thailand and sent back to uk for eating; crazy how some economics make sense. just like when it becomes impossible to have mostly anything fixed in uk because more economical to by a new one than pay some one local to fix it, then something has gone wrong in my opinion.