InfoQuest (March 24, 2020) -- As the worldwide outbreak of Covid-19 is getting worse and has a widespread impact on the economy, several agencies warned that the global economy could slip into a new round of recession in 2020 after the subprime crisis more than a decade ago. Thailand's economy, including tourism, consumption, investment, and exports which is the biggest driver for the country's economic growth, has also been inevitably affected by the outbreak in many ways, directly or indirectly, according to the Business Research Department of the Export-Import Bank of Thailand (EXIM Thailand).
Thailand's Ministry of Commerce recently revealed that exports fell by 4.5 percent in February 2020, which was better than the forecasts of many agencies. In addition to benefiting from an 180 percent spike in gold exports, according to the analysis, it found that the exports to Thailand's main export markets -- China, the EU, the United States, the Middle East, South Korea and Japan, which together account for nearly 50 percent of Thailand's total exports and account for a high number of Covid-19 infections and deaths -- fell less than expected.
Specifically, the exports to China saw a decline of 2 percent, as exports of some products were affected by the outbreak, especially exports of fresh fruit and cassava products fell by a higher margin due to the closure of border ports. At the same time, the export of oil-related products continued to plunge amid China's economic slowdown, but the decline was lower than previous forecasts (several bodies had estimated that the lockdown of several cities in China would have an impact on purchasing power and supply chain, resulting in a sharp drop in exports to China). The main positive factors for exports included the easing of the trade war, which has stimulated growth in exports which had previously been under pressure from the trade war, such as rubber products, automobiles and internal combustion engines, computers and parts.
The exports to the EU market grew by 1.2 percent. In particular, the exports to Italy and Germany, where the number of virus infections and deaths has increased rapidly, saw a slight increase, mainly driven by relatively high growth in air conditioners and internal combustion engines. The overall increase in Thai exports to the EU market may be due to the fact that there was no "super spread" of the virus in Europe in February. Therefore, to assess the impact of the outbreak on Thailand's exports to the European market, export data in March must also be considered (the exports to Spain dropped by 3.3 percent, mainly caused by a decline in exports of air conditioners and motorcycles).
The exports to the United States tumbled 37 percent, largely because of a high base for arms exports following last year's Cobra Gold drills. Excluding arms exports, exports to the United States rose by 18.3 percent, mainly because amid the trade war Thai products, such as computers and parts, rubber products, semiconductors, jewelry, and steel products, has displaced Chinese exports in American market.
The exports to South Korea only dipped by 1.5 percent. South Korea had the fastest growing number of infected cases around the world in February, but the epidemic situation was quickly brought under control, thanks to South Korean government's decisive and effective measures. This helped Thai exports such as rubber products, air conditioners, and paper and paper products to South Korea not see a significant drop.
The exports to Japanese market was down 11.1 percent, the biggest drop compared with other markets where the number of infected people is among the highest in the world. The main products that weighed on Thailand's exports to Japan in February were still industrial goods, including automobiles, computers and components, largely affected by Japan's overall sluggish economy before the outbreak. But exports of food products, which belong to daily necessities, especially processed chicken, Thailand's No. 1 agricultural export to Japan, increased.
The exports to Iranian market grew by 25.9 percent, mainly because exports of rubber, automobiles and canned fruit remained at a high growth rate. Overall, the exports to the Middle East saw an increase of 16.4 percent. The exports to the Middle East were still showing a high growth rate, which might be because the impact of the outbreak has not yet loom, as the surge in infections in this region occurred in late February. Therefore, the assessment needs to be conducted again based on the export data in March, particularly for Thailand's main export markets in the Middle East, including Saudi Arabia, Qatar and Israel, where the number of infected people is accelerating.
Although Thailand's exports dipped by just 0.8 percent in the first two months of 2020, better than its main competitors, including South Korea (-1.1 percent), Singapore (-2.9 percent) and Japan (-1.7 percent), in the second half of 2020 Thai exports will continue to face a number of risk factors, especially the Covid-19 pandemic. No one knows when it will end, and it is hard to clearly assess its impact. However, the recent export figures partly reflect the fact that Thailand's export sector is more flexible than in the past, with more diversified products and export markets than in the past.
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