ASEAN KEY DESTINATIONS
Thai baht's appreciation affects industries
But for every outraged exporter, there is probably another business executive quietly enjoying gains from lower-cost imports.
According to the research division of TMB Bank, a 10 percent gain in the baht will cause Thai exports to fall 3.3 percent each quarter, while the benefits from cheaper imports will be only short-term.
"In the longer term, the continuous decline of exports will drag down imports by 2.5% in every quarter," TMB Analytics said. On the upside, it said, "concerns over inflation have been partially eased".
An executive of a leading food exporter has warned of a crisis on a scale similar to what happened in 1997, when a speculative run on the baht touched off a crisis that dragged down most of Asia for years.
Losses of 80-100 billion baht have been estimated so far for food processors, textiles and other industries that use mostly local raw materials and thus do not benefit from cheaper imported inputs.
"The furniture and housewares sector, for example, has seen profit margins decline by 52 percent. Once the baht gains 20%, the manufacturers will post losses," the TMB report added. The Economic Intelligence Center of Siam Commercial Bank says the strong baht affects hits industries that have a higher export ratio against imported content. For example, smoked rubber sheet and block producers export up to 90 percent of their output against almost zero imports of raw materials. Rice exporters are in a similar condition.
Prasit Boonchoey, president of the Thai Farmers Association, said some additional costs have been passed on to farmers, yet they have not seen the prices of imported pesticides and fertilisers fall yet.
The strengthening baht has already trimmed rice farmers' income by about 300 baht a tonne. "The farmers' predicament would be worse if there was no government price insurance programme," he said.
However, conditions are not as good for farm products without such insurance coverage. Prices of pineapples, for example, have fallen this year by about 1 baht per kilogramme to 6 baht.
Comment on this Article. Send them to firstname.lastname@example.org
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below