Thailand's outward trade in November was hard hit by the catastrophic flooding and slowing global economy. Shipments of industrial goods in November fell sharply from the October's level despite the recovery seen in manufacturing production during the last ten days of the month. Sluggish manufacturing activities domestically and weakening momentum of the global economy diminished Thai exports in November to only USD15.5 billion, the lowest level seen in 19 months, against USD17.2 billion recorded in October. The poor showing is the first over-year contraction of 12.4 percent in two years, versus the 0.3 percent growth achieved in October.
In 2012, it is expected that Thailand's exports will decline substantially, pressured by murky global economic conditions amid the unresolved debt crisis in Europe. Overall shipments will also be affected by lost production capacities as a result of the flood crisis (which should take some times to recover to normal levels), while farm/food exports, which have helped drive the export sector in 2011, may slow as well, because of heightened pricing competition from rivals.
Given this, KResearch expects that Thai exports in 2012 (on the balance of payment base) will expand at a slower pace of just 5 percent, standing within our projected range of 2.0-8.0 percent (equivalent to some USD228.2-244.1 billion), which would be considerably lower than the 16.7 percent growth recorded in 2011.
The business sector will inevitably have to brace for volatility foreseen in the global economy and the Baht next year as these risks will not only affect demand for Thai products abroad, but also increase forex hedging costs. KGroup assesses that the Baht may move within a range of THB29.50-33.00/USD in 2012, compared to THB29.50-31.50/USD in 2011.