InfoQuest (Sept. 12, 2019) -- According to Pimchanok Wonphonphon, director of the Trade Policy and Strategy Office (TPSO) of Thailand's Ministry of Commerce, the Thai baht is expected to remain stable or may continue to appreciate in the rest of 2019, and the exchange rate is expected to fluctuate in the range of 30-31 baht/U.S. dollar. The above judgment is mainly based on the following reasons: (1) additional monetary easing policies launched by major countries in the world, such as the United States, China and the European Union; (2) Brexit; (3) international political conflicts, etc. Companies must therefore be required to take out currency risk insurance to cope with the impact of exchange rate fluctuations and possible currency appreciation in the rest of 2019.
TPSO analyzed the exchange rates of key trading partners of Thailand and found that from the beginning of 2019 to August 30, the average exchange rate of the Thai baht was 31.39 baht/U.S. dollar, up 2.2 percent from the same period of last year. The appreciation rate of Thailand's currency is larger than that of its main competitors and trading partners. Due to domestic economic and political factors and international conflicts, most countries' currencies have depreciated, such as South Korea (6.5 percent), the EU (6.3 percent), the UK (6.2 percent), Chinese mainland (5.3 percent), India (5.1 percent), Taiwan, China (4.0 percent), Malaysia (4.0 percent) and Vietnam (2.1 percent).
However, Thailand's exports have performed better on the whole than those of countries with weaker currencies. In the first seven months of 2019, Thailand's exports fell by 1.9 percent, while exports of the Republic of Korea, UK, Taiwan, China, and Malaysia fell by 8.9 percent, 3.5 percent, 2.9 percent and 4.8 percent, respectively. Therefore, the overall impact on exports has been limited although the Thai baht's appreciation has caused a drop in corporate revenues.
A survey of agricultural products most likely to be affected by currency appreciation revealed that exports to some markets maintained an upward trend while overall exports of some agricultural product categories declined. For example, rice exports fell by 18.5 percent, but exports to the U.S. market (accounting for 13.8 percent of the overall rice exports) grew by 13.9 percent in the first seven months of this year. Cassava exports fell by 6.9 percent, but the exports to the Japanese market (accounting for 10.6 percent of the overall cassava exports) rose by 3.2 percent in the first seven months of the year. Corn exports fell by 20.7 percent, but the exports to Vietnam (accounting for 23.2 percent of the overall corn exports) rose by 29.2 percent in the first seven months of the year.
In addition, canned seafood exports rose by 2.3 percent while exports to the United States and Japan rose by16.5 percent and 10.4 percent respectively in the first seven months of the year. With the increasing popularity of Thai fresh or frozen fruits, related exports increased by 44.9 percent. This reflects that other factors can affect agricultural exports, such as demand for products and product quality.
Exports of industrial products and all kinds of daily necessities showed a positive trend of growth. For example, the export of cosmetics/skin care products increased by 15.3 percent, radio and spare parts by 13.3 percent, motorcycles and spare parts by 12.6 percent, refrigerators by 3.3 percent and rubber products by 1.3 percent.
Source: InfoQuest, by Phana/Kasamarporn/Sasithorn, translated by Xinhua Silk Road
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