Thailand’s exports surged 7% in August as global markets recovered, but concerns have arisen over a stronger baht and flooding. Exporters warn the baht’s rapid appreciation may impact fourth-quarter performance, especially for SMEs and agricultural sectors.
Thailand’s exports boomed in August, recording 7% growth. The reason for the upturn is a more benign world economy. In short, interest rates are on the way down while inflation has been tamed worldwide. At the same time, the cost of freight has become competitive again. However, shippers and exporters are warning that the effects of the sharp rise in the baht will be felt in the fourth quarter. At the same time, there are fears for agricultural output due to the ongoing flooding crisis in the north.
Thailand’s export sector saw significant growth in August 2024. In brief, exports increased by 7% year-on-year. This growth came as the economies of major trading partners saw a recovery. In turn, this has fuelled demand for Thai goods.
According to Poonpong Naiyanapakorn, Director of the Office of Trade Policy and Strategy (OTPS), exports in August reached $26.18 billion. Certainly, it marks a strong rebound for the country’s trade sector.
In the same period, imports also surged by 8.9%, totalling $25.91 billion. Despite this, the country recorded a trade surplus of $264.9 million for August. For the first eight months of 2024, Thailand’s exports grew by 4.2%, reaching $197.19 billion. At the same time, imports increased by 5%, totalling $203.54 billion. However, this left the country with a cumulative trade deficit of $6.35 billion.
Agricultural products drove August export surge, while key markets showed positive momentum in World upturn
The rise in exports was driven largely by agricultural and agro-industrial products. In summary, these grew by 17.1% in August. Notably, top performers included fresh, chilled, frozen, and dried fruits, which expanded by 1%.
Rice exports surged by an impressive 46.6%, while rubber exports grew by 64.8%. Industrial exports also saw growth, with the sector expanding by 5.2%. Significantly, exports of computers and related components soared by 74.7%, while rubber products rose by 14.9%.
Thailand’s export markets showed widespread growth in August. Exports to the United States increased by 3%, while those to China rose by 6.7%. The European Union saw a significant 26.4% rise, while ASEAN markets grew by 4.5%. Exports to the CLMV group (Cambodia, Laos, Myanmar, and Vietnam) grew by 13.7%.
Secondary markets also demonstrated robust growth. Exports to South Asia increased by 22.8%, and the Middle East by 34.6%. African markets expanded by 20.3%, while exports to the United Kingdom grew by 2.6%. Other emerging markets surged by a remarkable 106.8%.
Global economic recovery fuels demand for Thai exports. However, a stronger baht and floods pose challenges
The global economic recovery, particularly in major markets, has been a key factor in boosting Thai exports. Easing inflation and gradually declining interest rates have also supported consumer demand, particularly in key trading partners such as the United States and ASEAN. Additionally, declining port freight costs since mid-August contributed to the favourable trade environment.
Despite these positive trends, there are concerns about future challenges.
The strong baht and reduced agricultural output due to flooding are seen as potential risks to export growth. Mr. Poonpong noted that the impact of these factors is expected to become more apparent in the fourth quarter. However, he remains optimistic that Thailand will meet its export growth target of 1-2% for the year. Certainly, the kingdom could potentially achieve a record export value of $290.7 billion.
Strong money inflows drive baht upwards. Business leaders warn it is time for urgent central bank action
The rapid appreciation of the Thai baht, now at 30-month highs against the U.S. dollar, is a growing concern. Indeed, exporters are already warning that a strong baht reduces liquidity and income, particularly for small and medium-sized enterprises (SMEs). Agricultural exporters are expected to be the most affected, with the impact becoming more visible from September onwards.
Exporters warn of risks from a powerful baht, with fourth-quarter uncertainty ahead. Fears for key sectors
Chaichan Charoensuk, Chairman of the Thai National Shippers’ Council (TNSC), emphasised that exporters are cautious about the baht’s strength. For instance, he warned that the volatility of the currency could cause losses when negotiating new orders. Some exporters may even choose to delay accepting new orders for the final months of the year to mitigate risks.
Looking ahead, the outlook for Thailand’s exports in the fourth quarter remains uncertain. Exporters are expected to face increasing pressure from the strengthening baht. Undoubtedly, this could slow down orders for November and December. This trend may continue into the first quarter of 2025, potentially hindering growth.
In response to these challenges, the National Economic and Social Development Board (NESDB) has urged the government to act. Firstly, it proposes a delay to the planned increase in the minimum wage. This would help ease the financial burden on manufacturers and exporters already battling with the baht’s appreciation.
Private sector urges action to stabilise the runaway baht as exporters warn of danger ahead of holiday season
The private sector, including the Thai Chamber of Commerce, has called on the Bank of Thailand to intervene in stabilising the baht. The Ministry of Finance and the central bank are expected to meet next week.
At length, they will certainly discuss measures to address the currency’s rapid appreciation and its impact on exports.
The Bank of Thailand has stated that it is closely monitoring the situation. Furthermore, it is prepared to reduce currency volatility if necessary. However, exporters are urging quicker action. They fear that the strong baht could undermine the country’s economic recovery in the final months of the year.
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