Thailand’s goods exports landscape


We explore Thailand’s goods exports exposures from a sectoral perspective against a backdrop of heightened global external headwinds.
Group Research, Chua Han Teng19 Sep 2022
  • Thai goods export growth is already normalising lower, albeit from a rather strong pace
  • The tech downturn does not bode well for electronics exports
  • Autos performance is still deep in the doldrums
  • Outperforming agro manufacturing shipments face challenging weather and cooling food prices
  • Downside risks to real GDP growth for 2022 and 2023, despite encouraging services upturn
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Below is a summary; for detailed charts and full report, please download the PDF

Thai goods exports were a notable bright spot through the pandemic crisis, benefitting from the strong recovery in advanced economies and goods demand. Following a robust performance that drove monthly export nominal values ~30% above pre-pandemic levels, the narrative on the pace of % YoY growth is, however, becoming more difficult, as the global external slowdown and headwinds take shape.

Thai goods export growth is already normalising lower, albeit from a relatively strong rate. Growth, on a 3-month moving average basis, entered 3Q22 in high single-digit rate (8.9% YoY in July vs an average of 15% in 1H22). The potential slowdown poses downside risks to Thailand’s economic growth, even as we see significant offsets from the shift to endemicity and foreign tourism pick-up. In this note, we explore Thailand’s goods exports exposures from a sectoral perspective (refer to Thailand: US, EU exposures amid slowing global growth for analysis from a country perspective).

Diving into the sectoral exposures

Thai goods exports are overwhelmingly reliant on manufactured products, accounting for close to 90% of the total. Thailand’s manufacturing export performance tends to be sensitive to global trade fluctuations. Based on our calculations, the sensitivity of Thai manufacturing export growth to world exports growth over the past 10 years is close to one. Within manufacturing goods, the top three categories on average over the past five years were electronics and electrical appliances (21%), autos (15%), and agro (13%). Beyond manufacturing, raw agriculture, fishery, and forestry overseas shipments constituted just less than 10%. In fact, their share trended lower over the past decade.

  • Electronics and electrical appliances (E&E)

Even though the global chips shortage is abating, IDC expects a 10.8% YoY and 2.6% YoY contraction in PCs and tablets shipments in 2022 and 2023 due to weakening consumer sentiment and demand. High frequency electronics exports data already indicate a significant slump in Thai computer parts. The contraction reached close to 15% YoY as of July 2022. The worst might not be over. Integrated circuits and parts exports are also slowing, although still expanding in YoY terms.

  • Autos

The cyclical performance of Thai autos exports has been very poor in 2022. Autos exports have been persistently impacted by global shortages of parts and semiconductor chips, first driven by earlier disruptions from the high point of the global pandemic and second the Russian-Ukraine war – Ukraine supplies most of the world’s semiconductor-grade neon gas. The ongoing ad-hoc lockdowns in China – world’s largest auto market – arising from its zero-COVID policy also add to the challenges.

Thailand’s passenger car exports have slumped significantly for almost a year, with a sharp drop of ~40% YoY recorded for five consecutive months as of July. Thai exports of vehicle parts & accessories are growing but at very low single-digit rates. Any rebound might be statistically driven helped by a favourable low base, given the weakening consumer sentiment in developed markets, and question marks over China (even though domestic auto sales are already rebounding post-Shanghai reopening, alongside incentive from lower sales tax).

  • Agro manufacturing

Thailand’s agriculture sector has been a notable bright spot in 1H22, with real growth registering at 4.6% YoY - higher than 2.2% in other sectors. Thailand’s overall agro manufacturing export growth has outperformed headline export expansion this year, swinging towards the early-2021 highs of ~20% YoY as of July. The uptrend has been primarily supported by food agro manufacturing export growth. Food agro manufacturing overseas shipments have been solid, trending higher for the past 15 months and has headed towards ~40% YoY increase.

While Thailand’s agricultural growth was previously supported by favourable weather conditions, the country is now facing challenges from widespread flooding due to increased rainfall from a wetter monsoon season, causing damage to agricultural crops. This could dampen food exports momentum.

Thailand’s food exports performance also likely benefitted from the sharp rise in global food prices with a couple of months lag. It would also cool in the coming months, given that the pace of % YoY increase in the UN FAO food price index is already moderating.

Rubber products export growth shrunk for 10 straight months in % YoY terms, albeit with a slight rebound. First, a recovery in this segment would depend on a turnaround in autos performance and tire demand. Second, with most of the world moving towards COVID-19 endemicity, global demand for rubber gloves has eased towards pre-pandemic levels and appears unlikely to return to the strong growth phase during the height of the pandemic.

To read the full report, click here to Download the PDF.

 
 

Chua Han Teng, CFA

Economist
hantengchua@dbs.com


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