Dismal set of figures from the Ministry of Commerce on exports just adds to the economic woes facing the Prime Minister’s proposed new economic team following the cabinet reshuffle. It comes as one bank expert, this week, warns that even for a country whose valuable foreign tourism sector is effectively closed down, the economic trend spurred on by this virus and initiated by politics in developed countries leading up to it, will see deglobalisation emerge as another a threat to Thailand’s already beleaguered economy.
Thailand’s exports contracted by over 23% in June as the kingdom’s economy reels from the continued effects of the Covid 19 emergency. The economy, in the second quarter, is expected to contract by at least 15%. Despite a range of economic headaches including a closed border to foreign tourists since April and an increasingly uncompetitive industrial base, the outgoing Governor of the Bank of Thailand, Veerathai Santiprabhob, predicts that Thailand will not need the assistance of the IMF but has expressed real concern at the long term damage this contraction will have on Thailand’s labour market. Mr Veerathai also predicted the economy will be back to pre-pandemic levels by the end of 2021.
Thailand’s Ministry of Commerce, through its Trade and Strategy unit, has just announced the worst monthly set of export figures in over 10 years.
Exports for June were off by over 23% on last year. It followed another spectacular drop for May of 22.5%.
The fall saw auto exports down by over 43%, gold by 86% and jewellery products by over 70%.
Overall, industrial exports were down by over 25% with equally disturbing figures for Thailand’s staple exports in the agriculture sector such as rice, down by 25.6%, rubber by over 55% and sugar by over 57%.
It comes as the Prime Minister, Prayut Chan ocha prepares to announce his cabinet reshuffle and what is thought to be a new economic team.
It will be called upon to grapple quickly and practically with an immediate challenge calling for decisive action that could have far-reaching consequences.
Bangkok based firm says the economy will contract by 15% in the second quarter of this year
Experts still insist, however, that Thailand’s economic descent is on target to bottom out. With a closed border to normal flights and passengers, this is quite difficult to see.
At the beginning of July, Bangkok based Asian Securities forecast the Thai economy to contract by 15% in the second quarter although today’s horrendous export figures may heighten fears of a deeper contraction for the period from April to June.
The securities firm was predicting a fall of between 10% and 13% in exports.
Announcing the figures for June exports, this week, in Bangkok, Pimchanok Vonkorporn, the Director of Trade Policy and Strategy at the Ministry of Commerce was more sanguine. She is expecting a fall in exports of 8 to 9% this year.
Exporters themselves are suggesting that the figure could be higher than this but Ms Pimchanok may be holding out, hoping for a beginning of a recovery in the third and fourth quarters.
She was buoyed somewhat by expanding exports in Thailand’s leading market, the United States and in its second-largest market, China, contained in the details of the figures announced.
8.3 million people have lost their jobs with fears for others as the economic crisis still deepens
The lockdown to fight off the virus has had a catastrophic effect within Thailand including the deepening effects of the country’s closed door to foreign tourism.
It is estimated that up to 8.3 million people have lost their jobs and the impact of this event has upended Thailand’s labour market leaving millions unable to find gainful employment, an unprecedented situation in the kingdom.
There are fears that the final tally of jobs lost could be as high as 10 million.
Banks report lower profits for the first half under new accounting rules and rising non performing loans
Figures out this week for some key banks showed a drop in first-half profits but a relatively low rise in non-performing loans. However, there has been a rise for all banks since the end of last year.
The latest financial statements from the banks are made under the new Thai Financial Reporting Standard 9 (TFRS9) rules. These were introduced by the Oversight Committee on Accounting Professions before this emergency and became effective in Thailand on the 1st of January 2020.
Kasikorn Bank reported an income tax and credit loss of ฿46 billion before announcing a profit for the first 6 months of ฿9.16 billion which was down over 52% on last year. Non-performing loans stood at 3.9% up from 3.65% at the end of 2019.
Tisco Bank saw its profits off by 20.1% with a net figure of ฿2.81 billion. More worryingly, however, its net profit for the second quarter was down 25.9% on last year at ฿1.33 billion.
The bank reported that its asset base had been weakened due to the new reporting standard and revealed that non-performing loans rose from 2.56% in March this year to 3.28% in June.
One bank, TMB-Thanachart, bucking the trend
A bank that appears to be bucking the trend, however, is the new TMB-Thanachart Bank which saw a spectacular rise of 108% in profits for the first 6 months to ฿7.25 billion.
Its profit was also up in the second quarter by over 61% at ฿3.09 billion.
This was achieved by combining the operations of the two banks and subsequent efficiencies.
Thailand could be one of the big losers in this crisis as the trend to deglobalisation takes hold
The continued uncertainty and wide-ranging impact of the coronavirus emergency both inside Thailand and out, has brought some economic experts to warn that Thailand could be one of the key losers from the debacle and a new world trend.
The country’s workforce is ageing faster than its competitors and the country’s already damaged industrial base is geared towards low tech industry.
The kingdom is competing against more agile neighbours, in particular, Vietnam with a superior network of trade agreements compared with Thailand which is still suffering from the residual effects of the coups in 2006 and 2014.
Tisco Bank expert warns of ‘deglobalisation’
This week, in an interview with The Nation newspaper, Komsorn Prakobphol, a senior analyst with Tisco Bank, warned that Thailand will also suffer because of what he termed ‘deglobalisation’ of supply chains and industrial networks.
He predicted that many western and Japanese firms moving out of China will opt instead for production processes using robotics while moving production capability closer to home.
This would reverse a trend that began over 40 years ago and will ultimately mean Thailand must rethink and recalibrate its policies.
The move towards deglobalisation had begun years before the Covid 19 crisis driven by emerging politics in developed countries where voters have surprised economic leaders with their tenacity on this issue.
This has seen the election of US President Donald Trump in the US and Brexit in the UK.
University boss concerned that the latest political unrest could make economy even worse
This week, the President of the University of the Thai Chamber of Commerce (UTCC), Thanawat Polvichai, warned that the economy could even see further damage in 2020 if political protests take off and exacerbate the situation further.
The economic expert also noted recent opinion polls which consistently show the Thai public’s reticence for reopening the country’s foreign tourism sector because of the health scare.
Outgoing central bank chief worried about Thailand’s labour market and the impact on new graduates
At a conference this week, outgoing Bank of Thailand Governor Veerathai Santiprabhob, suggested that Thailand can withstand this crisis and in time, recover.
He said he saw the economy only returning to pre-pandemic levels at the end of 2021.
Mr Veerathai expressed his concern about the damage this crisis has inflicted on the labour market and in particular, the prospects for young graduates finding employment in the coming few years.
‘The central bank’s biggest concern is employment, because the Covid-19 pandemic has adversely affected the labour market in both the services and manufacturing sectors, where large numbers of workers were laid off,’ he said.
Thailand will not need IMF assistance
He was confident, at the same time, that Thailand would not need to seek the assistance of the International Monetary Fund and this economic challenge was not similar, in this respect, to the Asian Financial Crisis of 1997.
The central banker observed that despite a growth in capital outflows, Thailand still retains a surplus for this year.
Mr Veerathai noted that, currently, 102 countries had already applied for IMF assistance. Thailand, he thought, would not be one of them, at least for now.
He suggested that the bank would prioritise debt restructuring efforts and the disbursement of a ฿500 billion loan scheme which has now been extended into 2021.
Conditions and eligibility for the scheme have also, in recent days, been made more flexible.