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10 Apr 2020

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COVID-19 Pandemic in Neighboring Countries to Cause 2020 Border and Cross-Border Trade to Shrink 12.8% (Current Issue No.3098)

             Plummeting oil prices and measures aimed at combating the coronavirus (COVID-19) pandemic in some of Thailand's neighboring countries caused our border-trade and cross-border exports to contract 8.6 percent YoY during 2M20. The spread of the COVID-10 respiratory disease in all member ASEAN states at this time will likely weaken such Thai shipments further during 1H20. However, Thailand's border-trade and cross-border exports to Malaysia and Singapore have been supported by stronger demand for intermediate products that are essential for the production of medical supplies and work-from-home products, whereas our border-trade and cross-border shipments to Cambodia, Myanmar and Lao PDR will likely shrink throughout the year due to declining commodity prices. Meanwhile, China, which has survived the COVID-19 crisis, will likely be able to recover faster than other countries during 2H20 and this may allow it to bolster some export categories to Vietnam, though many Chinese export categories will have to depend on the recovery in global markets. As a result, its exports overall will continue to contract.

                  However, the softening Thai Baht in 2020 may provide greater opportunities for Thailand to market products, but sinking oil prices and purchasing power abroad are downside risks that could inhibit our border-trade and cross-border exports. As a result, we at KResearch are of the view that the COVID-19 pandemic may cause Thailand's border-trade and cross-border shipments to decline substantially during 1H20 although there are positive signs foreseen in 2H20, yet they will depend on how quickly each country can combat the COVID-19 pandemic. On that account, we expect that Thailand's border-trade and cross-border shipments will continue to shrink 12.8 percent or within a range of 15-9 percent to THB804.3 billion or THB784.0-839.4 billion in 2020, against the 0.2 percent contraction to THB922.38 billion reported for 2019. Nevertheless, if the COVID-19 pandemic can be contained worldwide by late 2Q20, our neighboring markets will likely recover at a faster pace. In addition, if oil prices rise above USD40/barrel, the value of Thai border-trade and cross-border exports may improve over our prior estimate.   

            ​      Meanwhile, as persons, vehicles and things, except for the transportation of goods, were prohibited to enter into and exit Thailand on March 23, 2020 onward to combat the COVID-19 pandemic, people and entrepreneurs from our neighboring countries have not been able to purchase products in Thailand for sale in their countries until the crisis eases. As a result, spending by people and entrepreneurs from neighboring countries at all our border checkpoints has disappeared by at least THB1.0 billion/day, especially in Nong Khai, Mukdahan, Sa Kaeo, Chiang Rai and Tak that once buzzing with businesses and activities. 


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