Exports, a pillar of strength in Thailand's wobbly economy, have suddenly slowed due to cooling foreign demand and a strong currency, raising fears the kingdom will miss already modest growth targets. Thailand counts on exports for 60 percent of its economy.
It is the world's biggest exporter of rice and also a major producer of cars, textiles, electrical appliances, fruit and shrimp. But exports in July grew a modest 5.9 percent year-on-year to 11.8 billion dollars, the lowest level in 29 months, amid a slump in demand in the United States and Japan, the kingdom's top trading partners.
"Exports grew slower than our target of above eight percent in July because of the strong baht and a decline in demand abroad," said Tanyalak Surapol, a senior economist at the private Kasikorn Research Centre.
US-bound shipments in July dropped by 13.6 percent from a year earlier, while exports to Japan edged up just 1.7 percent in the month, the commerce ministry said.
The weak July data came as a particular shock as exports had been rising over 18 percent each month since January this year. Exports have been among the few bright spots of the Thai economy, which has been hit by sagging business confidence and anaemic consumer spending due to prolonged turmoil over last year's coup ousting premier Thaksin Shinawatra.
The military-installed government has expected the economy to grow just over four percent this year, among the lowest in Southeast Asia, while cutting the export growth forecast for the full year to 12.5 percent from 13.0 percent.
"Exports will be a far less potent engine of growth for the Thai economy during the second half," Phatra Securities said in a research paper following the release of the July export data.
"The government's 4.0-4.5 percent GDP growth target will be harder to achieve in light of the export slowdown," it said. Apart from weak foreign demand, exports were under pressure due to the strong Thai baht, which hit near 10-year highs against the dollar on massive capital inflows pouring into the local stock market, analysts said.
A strong baht makes Thai goods less competitive abroad and cuts the value of repatriated profits. The government in late July launched a package of measures in a bid to weaken the baht.
Since then, the baht has fallen to more than 34 to the dollar, against a 10-year-high of 33.2 in early July, but economists warn of sluggish growth if exports continued to stall.
"It is worrying if export growth remains slow for the rest of the year. That will pressure economic growth in the fourth quarter," said Somchai Jitsuchon, director of macroeconomic development at the Thailand Development Research Institute.
Finance Minister Chalongphob Sussangkarn last week downplayed worries over slowing exports. "We are confident that the decline in exports will not impact gross domestic product growth, which is targeted at 4.0 percent this year," the minister said. But Tanyalak from Kasikorn Research said the export trend looked ominous.
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