Thai Exports Will Be Hit By Euro Crisis

[webfact]

SEMINAR

Thai exports will be hit by Euro crisis

PETCHANET PRATRUANGKRAI

THE NATION

BANGKOK: -- The euro-zone crisis will continue to be a drag on the global economy for the next few years, with Thai exports taking a direct blow and seeing growth at only a single digit this year, far below the target of 15 per cent, exporters and bankers warned yesterday.

"The EU crunch could be seriously exposed by the middle of next year and affect the global economy badly. Although the US will come out with quantitative easing (QE3) measures, the US dollar will continue to weaken, causing the baht to strengthen and undermine Thai exports," said Sutapa Amornvivat, chief economist of SCB Economic Intelligence Centre.

At a seminar on the "Euro and China economic crises: Impact on Thai shipments", organised by the Federation of Thai Industries (FTI) and Siam Commercial Bank (SCB), the private sector and bankers said Thai shipments will be hard hit by the paralysis in Europe and slowdown in China. The turmoil will also cause problems for the banking and financing industries, so exporters have to carefully prepare for higher risk.

To drive exports and ensure that each industry will survive, the government needs to provide serious support along many lines, including financial, taxation, rules and regulations, and trade negotiations, exporters said.

Arthit Nanthawithaya, vice president of corporate banking at SCB, said the EU crisis is widening, as it is about sovereign debt structures, which will take time to mend. The slow recovery of the US economy will not be able to prop up global growth and prevent Thai exports from falling.

Sutapa of SCB Economic Intelligence Centre pointed out that the EU crunch would be more serious than the US crisis, which has lingered for more than four years.

The industries that are most exposed to the EU meltdown are apparel, canned food, electronics, computer, jewellery, rubber and machinery.

The slide of the EU will also have a collateral impact on Thai shipments to China. Industries that will suffer the most are plastic, chemical, rubber, electronics, computer and rubber products.

The baht will fluctuate only slightly in the rest of this year, between Bt30-Bt32.5, against the greenback. Exporters should hedge their orders to guarantee payment.

The Thai economy is also expected to gear down to about 5.6 per cent growth this year, instead of 5.8 per cent as expected, she added.

Manop Sangiambut, head of international banking at SCB, said Thai shipments to China would be tripped up by the sluggishness of its economy, as well as from the lacklustre exports of China to other markets.

China is expected to see its exports slide by 1 per cent this year. The China Purchasing Manager Index also shows that demand for production was below 50 last month, which means that manufacturing in China will continue to slip in the following year.

Somchai Phornchindarak, president of the Thai Gems and Jewellery Traders Association, said jewellery exports have suffered greatly because of the EU chaos.

In the first five months of this year, exports to the EU dropped by 17.4 per cent to $3.2 billion, from $5.4 billion in the same period last year. Thai jewellery's share of the global market has shrunk from 3 per cent last year to 2.6 per cent today.

Not only has the sluggishness of the EU hit Thai jewellery exports, but also the higher competitiveness of rivals and the high tariffs and barriers to imports in Thailand, which obstruct Thai export competitiveness.

The government should permanently waive duties on imported materials and inject funds into SMEs in many industries.

The government should also start free-trade negotiations with the EU and the US under the Trans-Pacific Partnership Agreement to ensure that Thailand will get export privileges to those major markets, he added.

Vallop Vitanakorn, vice chairman of the FTI and adviser to the Thai Garment Manufacturers Association, said companies are struggling to maintain their export growth by setting up plants in neighbouring countries.

Garment exports to the EU were down sharply by 19.9 per cent in the first five months. Shipments to Spain were the hardest hit, plunging by 43 per cent, while exports to the US fell by 10 per cent. The government should help manufacturers in maintaining exports and driving exports to other markets.

Sakda Dumnakkaew, manager of market risk management at SCB, said the EU crunch would create both direct and indirect impacts on the financial and exporting sectors. Exporters should buy forward contracts for doing business with EU countries, as well as with some countries that are at high risk of being impacted hard by the EU crisis.

Ekachai Limpichotipong, vice chairman of the FTI's Rubber Products Industry Club, said producers are trying to compensate for the slowdown in the EU by concentrating more on the domestic market. However, rubber products, mainly tyres, have not yet been salvaged by the EU crunch as the automobile industry has enjoyed strong demand since early this year.

Another seminar said:

At another seminar held by the Economic Reporters Association on "The Euro-Zone crisis and export survival", exporters and bankers expressed concern for regional currencies including the baht.

Phongsak Assakul, president of the Thai Chamber of Commerce, said the expected implementation of the third round of US quantitative easing, or QE3, will send capital flowing into Asia, which will strengthen their currencies. If the baht's exchange rate does not come in line with other currencies in the region, the export sector would be at a big disadvantage.

The euro-zone crisis will take years to end, which will directly affect Thai exports, especially of luxury goods such as gems and jewellery, ornaments and garments. These products are among the priority targets for spending cuts by consumers.

"The Kingdom's export target, which is set to grow by 15 per cent, is hard to achieve. If the government still sticks to the target, it needs to ensure export growth of an average 15 per cent per month through the rest of the year. Successful government measures will allow Thailand to see exports grow more than 10 per cent this year," he said.

Somporn Chitphentom, senior executive vice president of the Export-Import Bank of Thailand, said the EU's economic crunch has not made much of a difference in the country's exports, as delays of payments and payment defaults are still low.

However, the projected launch of QE3 by the US will encourage capital to flow to the region and this will cause the baht to appreciate.

"The bank has warned exporters not to speculate on the baht exchange rate but to think of how to gain from the price of goods. Any mistake from currency speculation will cause a business to collapse," he said.

The bank has launched some assistance measures for exporters, for instance, lowering surcharges and easing risk insurance requirements.

Somchai Pornjindarak, president of the Thai Gems and Jewellery Traders Association, said exporters have run into payment defaults from European importers, which has squeezed their cashflow. They also had to bear losses from exchange rate volatility. This especially applies to SMEs.

-- The Nation 2012-07-12

[rakman]

Hmmm. Wasn't there an article that Thailand would be just fine regardless of the EU situation?

[canopus1969]

And just how long has it taken these brainless wonders to work that out

[hgma]

political motivated statement.

[belg]

euro lost 20% of its value over the year 2010 which costed me dearly when i finally was ready to switch my hard earned euros over my lifespan into little baht's... as i only then, realised that my bank gave me 0.15% annualy for my euro deposits...

i see the euro even drop more to incredible lows, even lower than 12 years ago when i came here for the first time

[oilreg]

US quantitative easing, or QE3, will send capital flowing into Asia, which will strengthen their currencies

the guy who said that was not burden with schooling, as it seems

QE is money printing withought backup

... if you do that the it weakens the currency

happend in like 100 countries before always with the same outcome, why do some people believe for them it would be the other way around?

one of the reasons for the EU crisis is the massive bailouts which is money printing without backup

Edited July 12, 2012 by oilreg

[Naam]

euro lost 20% of its value over the year 2010 which costed me dearly when i finally was ready to switch my hard earned euros over my lifespan into little baht's... as i only then, realised that my bank gave me 0.15% annualy for my euro deposits...

i see the euro even drop more to incredible lows, even lower than 12 years ago when i came here for the first time

at the EURo's inception in 1999 the exchange EURo THBaht was 37.60, today it is 38.70 = more or less "same same". in between we saw big fluctuations (high 53.6 in 2008 / low 34.37 in 2000). that you changed your EUR in 2010 was a matter of bad luck timing.

therefore my question "where's the beef in your forecast even drop more to incredible lows?"

[yoshiwara]

euro lost 20% of its value over the year 2010 which costed me dearly when i finally was ready to switch my hard earned euros over my lifespan into little baht's... as i only then, realised that my bank gave me 0.15% annualy for my euro deposits...

i see the euro even drop more to incredible lows, even lower than 12 years ago when i came here for the first time

at the EURo's inception in 1999 the exchange EURo THBaht was 37.60, today it is 38.70 = more or less "same same". in between we saw big fluctuations (high 53.6 in 2008 / low 34.37 in 2000). that you changed your EUR in 2010 was a matter of bad luck timing.

therefore my question "where's the beef in your forecast even drop more to incredible lows?"

Well that might cheer him up.

Fluctuations in currency pairs can be quite dramatic and can impact one's sense of wealth. Retail investors can suffer from a common malaise which is that when the rate is in their favour they wait because they think it is going to get better and when the rate is going against them fear kicks in that it is going down even further. Always behind the curve. I suspect he thought about the change a year ago and sat on his hands.

[jomtienbob]

US quantitative easing, or QE3, will send capital flowing into Asia, which will strengthen their currencies

the guy who said that was not burden with schooling, as it seems

QE is money printing withought backup

... if you do that the it weakens the currency

happend in like 100 countries before always with the same outcome, why do some people believe for them it would be the other way around?

one of the reasons for the EU crisis is the massive bailouts which is money printing without backup

Correct - there is no backup because Nixon (and the rest of the world's economies run by Central Banks soon followed) abandoned the Gold standard so he could fund the Vietnam War. Problem was of course that once the war was over the Banking System remained. Yep they have no Fiscal controls over them and no oversight. That is the Bankers and the Politicians. Jeez I wish people would understand that giving Politicians free run of the printing press to make money is like like giving drug addicts the keys to the pharmaceutical corporations and say to them "You be good now! don't do anything naughty!" Asia's corruption is in the open, widespread and everyone gets a little bit of it. The West's is only deemed for a small rich minority and very well concealed and much much more lethal to the masses.

[kdc1899]

US quantitative easing, or QE3, will send capital flowing into Asia, which will strengthen their currencies

the guy who said that was not burden with schooling, as it seems

QE is money printing withought backup

... if you do that the it weakens the currency

happend in like 100 countries before always with the same outcome, why do some people believe for them it would be the other way around?

one of the reasons for the EU crisis is the massive bailouts which is money printing without backup

Hello,

The Federal Reserve does not print U.S. Dollars. The Treasury Department does that.

The Central Bank kinda like prints debt by backing treasuries, and such. The Treasury Department can sell (print) more debt (and pay current bills) when the Central Bank issues programs like QE.

We don't need a piece of gold colored ore to "backup" the most significant country on the planet. We have more than enough real collateral in The States to have currency folk flock to The Greenback when the going gets rough. When the going gets better the Treasury Department will take in enough revenue to not need to print much debt. The U.S. Dollar will get stronger and the interest on previous debt will be cheaper because we will be paying the (foriegn currency incurred) debt down with U.S. Dollars.

smile

KDC

[andytime]

The whole (western) world is mired in debt (and now asia loading up at speed on debt) and people's beliefs and values are based on what has always happened before. We determine good or bad value based on what we thought we paid or received before. Maybe this time will be a little different. The world is in a structural mess. Western consumers are tapped out and the "consumption" was all based on a 40 year plastic et al credit boom which has now ended or in the last stages of its life which allowed people to buy things they never had the money for today (and not tomorrow). Asia has exported many of these magical things we consume. Maybe 10-35% (perhaps a lot more) of the cake will be gone (likely forever). Not sure of the Christmas tree consumption but we won't be using as many going forward that is for sure. Throw in massive demographic changes and structural changes that have resulted from globalization and the challenges ahead will be many. Someone that used to earn commission selling a TV set or stereo now works (if lucky) packing it for despatch on $7-10 an hour if in the states. Whilst Thailand produces.. this time around one suspects that credit inspired binges here encouraging people to take on debt for the purchase of cars/houses and condominiums will once again end badly. Considerably worse than government projections (look at Brazil.. estimated 26% default rate on credit cards.. a little scary if true). The world does not stop and yes many thousands and millions want what many have had but few of these have the capacity (and one would argue stupidity). However, perhaps a reality check is required. Can tourist numbers possibly be the same? Can expenditure be the same? Can exports remain the same and continue growing? All perhaps are based on this broken model and as economists are discovering world over (Australian economists just discovered a 28k plus job loss whilst those same people expected flat employment figures) that things will be different. Don't believe the authorities lies... educate yourself on what is happening and why? Few predicted what happened in 2007/8 and if they did not then take their word with a pinch of salt. Governments and the power brokers will manipulate things in their favour at the expense of the you and me of this world. Whilst the USD serves as the world's reserve currency - it's obligations and liabilities are likely to sink it and a few others like a stone. Whilst things will be volatile and perhaps the dollar is likely to surge one more time we are looking a the end game of a fiat monetary system where people believe bits of paper can be traded for goods. Thailand thinks it will have 15% growth.. only a deluded blind mullet could believe that. Enough overpriced apartments in Thailand for the next 15-20 years and likely enough shopping centre space for each and every thai to open a shop and are you sure the tourists/spinners will keep coming in the same volume to get ripped off. Work out what people really need and these are the sectors where money will be made.. many others may not be there in the years to come. One suspects that 15% growth will be a dream and likewise the party days in the EU, Australia and the states are well and truly over. A long rant beer assisted of course....

[Naam]

Hello,

The Federal Reserve does not print U.S. Dollars. The Treasury Department does that.

The Central Bank kinda like prints debt by backing treasuries, and such. The Treasury Department can sell (print) more debt (and pay current bills) when the Central Bank issues programs like QE.

We don't need a piece of gold colored ore to "backup" the most significant country on the planet. We have more than enough real collateral in The States to have currency folk flock to The Greenback when the going gets rough. When the going gets better the Treasury Department will take in enough revenue to not need to print much debt. The U.S. Dollar will get stronger and the interest on previous debt will be cheaper because we will be paying the (foriegn currency incurred) debt down with U.S. Dollars.

smile

KDC

that is mission impossible because the GNoE™ (Greatest Nation on Earth, aka U.S. of A.) does not have any foreign currency debt.

mission impossible but quite entertaining is also your fairy tale of "real collateral" and "will take in enough revenue" and last not least "most significant country".

keep up to the good job!

[kdc1899]

Hello,

The Federal Reserve does not print U.S. Dollars. The Treasury Department does that.

The Central Bank kinda like prints debt by backing treasuries, and such. The Treasury Department can sell (print) more debt (and pay current bills) when the Central Bank issues programs like QE.

We don't need a piece of gold colored ore to "backup" the most significant country on the planet. We have more than enough real collateral in The States to have currency folk flock to The Greenback when the going gets rough. When the going gets better the Treasury Department will take in enough revenue to not need to print much debt. The U.S. Dollar will get stronger and the interest on previous debt will be cheaper because we will be paying the (foriegn currency incurred) debt down with U.S. Dollars.

smile

KDC

that is mission impossible because the GNoE™ (Greatest Nation on Earth, aka U.S. of A.) does not have any foreign currency debt.

mission impossible but quite entertaining is also your fairy tale of "real collateral" and "will take in enough revenue" and last not least "most significant country".

keep up to the good job!

Hello,

When we make payments to China we pay them in their Chinese currency. We exchange our currency for their currency and pay them the dividends (payments) we owe them on the debt they purchased from our federal treasury. Same same for Abu Dabi, etc, etc

[Naam]

Hello,

When we make payments to China we pay them in their Chinese currency. We exchange our currency for their currency and pay them the dividends (payments) we owe them on the debt they purchased from our federal treasury. Same same for Abu Dabi, etc, etc

Hello,

sure and one of Santa Claus' reindeers is called Rudolph. did you know that Rudolph has a red nose and except for the Christmas holidays he works in the federal treasury's dividend department?

[Sayonarax]

But PM Yingluck told us it wouldn't affect Thailand. Im so confused, how could she make such a statement.

*sarcasm inserted*

[yoshiwara]

Hello,

When we make payments to China we pay them in their Chinese currency. We exchange our currency for their currency and pay them the dividends (payments) we owe them on the debt they purchased from our federal treasury. Same same for Abu Dabi, etc, etc

Hello,

sure and one of Santa Claus' reindeers is called Rudolph. did you know that Rudolph has a red nose and except for the Christmas holidays he works in the federal treasury's dividend department?

My understanding is that the use of RMB for international settlement is a rather new and limited phenomenon, particularly as RMB is not a fully convertible currency (happily accepted in HK though for Rolex shop-ping). Trade for China goods is I believe mostly settled in $US. It is these dollars which are used to purchase Treasuries etc.

[kdc1899]

Hello,

When we make payments to China we pay them in their Chinese currency. We exchange our currency for their currency and pay them the dividends (payments) we owe them on the debt they purchased from our federal treasury. Same same for Abu Dabi, etc, etc

Hello,

sure and one of Santa Claus' reindeers is called Rudolph. did you know that Rudolph has a red nose and except for the Christmas holidays he works in the federal treasury's dividend department?

My word. I'm trying to keep it simple forya. Your simpleton replies are the reason why.

Hows about when the vig is up on the U.S. Treasury Securities? Does that sound betta 2 ya than a dividend?

YoshiwaraSon; badass avatar.

[Naam]

Hello,

When we make payments to China we pay them in their Chinese currency. We exchange our currency for their currency and pay them the dividends (payments) we owe them on the debt they purchased from our federal treasury. Same same for Abu Dabi, etc, etc

Hello,

sure and one of Santa Claus' reindeers is called Rudolph. did you know that Rudolph has a red nose and except for the Christmas holidays he works in the federal treasury's dividend department?

My word. I'm trying to keep it simple forya. Your simpleton replies are the reason why.

Hows about when the vig is up on the U.S. Treasury Securities? Does that sound betta 2 ya than a dividend?

YoshiwaraSon; badass avatar.

hello, hello...

Does that sound betta 2 ya

whateva ya rite sounds like bullsh**. not only to me but to anybody who possesses a wee bit knowledge of economics. however, most of us like bullsh*ters because some of them can be quite entertaining and i repeat "keep up the good job!"

[transam]

The whole (western) world is mired in debt (and now asia loading up at speed on debt) and people's beliefs and values are based on what has always happened before. We determine good or bad value based on what we thought we paid or received before. Maybe this time will be a little different. The world is in a structural mess. Western consumers are tapped out and the "consumption" was all based on a 40 year plastic et al credit boom which has now ended or in the last stages of its life which allowed people to buy things they never had the money for today (and not tomorrow). Asia has exported many of these magical things we consume. Maybe 10-35% (perhaps a lot more) of the cake will be gone (likely forever). Not sure of the Christmas tree consumption but we won't be using as many going forward that is for sure. Throw in massive demographic changes and structural changes that have resulted from globalization and the challenges ahead will be many. Someone that used to earn commission selling a TV set or stereo now works (if lucky) packing it for despatch on $7-10 an hour if in the states. Whilst Thailand produces.. this time around one suspects that credit inspired binges here encouraging people to take on debt for the purchase of cars/houses and condominiums will once again end badly. Considerably worse than government projections (look at Brazil.. estimated 26% default rate on credit cards.. a little scary if true). The world does not stop and yes many thousands and millions want what many have had but few of these have the capacity (and one would argue stupidity). However, perhaps a reality check is required. Can tourist numbers possibly be the same? Can expenditure be the same? Can exports remain the same and continue growing? All perhaps are based on this broken model and as economists are discovering world over (Australian economists just discovered a 28k plus job loss whilst those same people expected flat employment figures) that things will be different. Don't believe the authorities lies... educate yourself on what is happening and why? Few predicted what happened in 2007/8 and if they did not then take their word with a pinch of salt. Governments and the power brokers will manipulate things in their favour at the expense of the you and me of this world. Whilst the USD serves as the world's reserve currency - it's obligations and liabilities are likely to sink it and a few others like a stone. Whilst things will be volatile and perhaps the dollar is likely to surge one more time we are looking a the end game of a fiat monetary system where people believe bits of paper can be traded for goods. Thailand thinks it will have 15% growth.. only a deluded blind mullet could believe that. Enough overpriced apartments in Thailand for the next 15-20 years and likely enough shopping centre space for each and every thai to open a shop and are you sure the tourists/spinners will keep coming in the same volume to get ripped off. Work out what people really need and these are the sectors where money will be made.. many others may not be there in the years to come. One suspects that 15% growth will be a dream and likewise the party days in the EU, Australia and the states are well and truly over. A long rant beer assisted of course....

Sorry, can't read your tiny script.

[ripstanley]

The whole (western) world is mired in debt (and now asia loading up at speed on debt) and people's beliefs and values are based on what has always happened before. We determine good or bad value based on what we thought we paid or received before. Maybe this time will be a little different. The world is in a structural mess. Western consumers are tapped out and the "consumption" was all based on a 40 year plastic et al credit boom which has now ended or in the last stages of its life which allowed people to buy things they never had the money for today (and not tomorrow). Asia has exported many of these magical things we consume. Maybe 10-35% (perhaps a lot more) of the cake will be gone (likely forever). Not sure of the Christmas tree consumption but we won't be using as many going forward that is for sure. Throw in massive demographic changes and structural changes that have resulted from globalization and the challenges ahead will be many. Someone that used to earn commission selling a TV set or stereo now works (if lucky) packing it for despatch on $7-10 an hour if in the states. Whilst Thailand produces.. this time around one suspects that credit inspired binges here encouraging people to take on debt for the purchase of cars/houses and condominiums will once again end badly. Considerably worse than government projections (look at Brazil.. estimated 26% default rate on credit cards.. a little scary if true). The world does not stop and yes many thousands and millions want what many have had but few of these have the capacity (and one would argue stupidity). However, perhaps a reality check is required. Can tourist numbers possibly be the same? Can expenditure be the same? Can exports remain the same and continue growing? All perhaps are based on this broken model and as economists are discovering world over (Australian economists just discovered a 28k plus job loss whilst those same people expected flat employment figures) that things will be different. Don't believe the authorities lies... educate yourself on what is happening and why? Few predicted what happened in 2007/8 and if they did not then take their word with a pinch of salt. Governments and the power brokers will manipulate things in their favour at the expense of the you and me of this world. Whilst the USD serves as the world's reserve currency - it's obligations and liabilities are likely to sink it and a few others like a stone. Whilst things will be volatile and perhaps the dollar is likely to surge one more time we are looking a the end game of a fiat monetary system where people believe bits of paper can be traded for goods. Thailand thinks it will have 15% growth.. only a deluded blind mullet could believe that. Enough overpriced apartments in Thailand for the next 15-20 years and likely enough shopping centre space for each and every thai to open a shop and are you sure the tourists/spinners will keep coming in the same volume to get ripped off. Work out what people really need and these are the sectors where money will be made.. many others may not be there in the years to come. One suspects that 15% growth will be a dream and likewise the party days in the EU, Australia and the states are well and truly over. A long rant beer assisted of course....

Sorry, can't read your tiny script.

Very true. Please check font before posting.

[kdc1899]

Well, since you wanna continue to be vague can we just agree to disagree on whatever you ain't specifically disagreeing 2 ?

Howze bout da part where I proclaim dat Central Banks don't print money? Can we agree on dat? na kop

[MAJIC]

Didn't Yingluck say a few days ago,that the Euro Crisis will have no effect on Thailand?

[LUSHGOAT]

All bullshit the Thai Government have been talking about devaluing the Baht for how long now they are delusional they think they do not need foreign investment they don't need us going there on holiday heck if we are married we cant even buy a house in our own name and the ridiculous crap we have to go through just to buy a car or a motor cycle. They set us up to be screwed at every corner. My wife comes to my country she gets her visa free because we are married and only has to go to immigration after the first 30 days and that's it but I have to pay €140 and leave the country every three months adding more expense. The bottom line they don't want us there if we go to a national park my wife pays 30 baht I pay 600 baht then they say we are not racist. and all you Farangs who don't agree with me well I'm sorry to say you are just as bad. Well that's my rave over for today. Have a nice day folks.

Edited July 14, 2012 by LUSHGOAT