ASEAN KEY DESTINATIONS
Thai exports to take quake hit
Economists expect the catastrophe in Japan to have an effect on Thailand's exports in the near future, but reconstruction efforts and economic stimulus could help the economy to rebound strongly.
Thailand’s Fiscal Policy Office expects Thailand's export sector to be hurt as Japan accounts for 10 percent of the country's total exports, with computer and automotive parts key sectors. Disruption of the supply chain could also affect imports, which are double the share of exports. "The impact of the massive earthquake on the Japanese economy has not been quantified. Based on our estimates, every 0.1 percent decline in the Japanese economy would affect the Thai economy by the same magnitude [0.1%]," said Naris Chaiyasoot, the FPO director-general.
But Mr Naris cautioned that his early talks with local firms suggest the impact on industrial exports might not be as negative as feared.
Foreign direct investment from Japan is expected to remain unaffected in the short term as most firms have made long-term investment decisions.
Finance Minister Korn Chatikavanij said oil prices were dropping as demand for crude receded by 20 percent because some refineries shut down.
Japan's efforts to rebuild its facilities could lead the economy to rebound strongly in the next few years, mirroring the strong growth after the 1995 Kobe earthquake.
The currency market was driven by expectations that repatriation of funds by Japanese firms ahead of the March 31 end of their financial year and the rebuilding of headquarters would cause the yen to strengthen.
But Junko Nishioka, chief economist for Japan with Royal Bank of Scotland, warned the yen might not be as strong as in 1995 in the aftermath of the Kobe quake, when there was massive demand for yen to settle carry-trade contracts overseas.
"We think the magnitude of the yen's appreciation will be milder than in 1995. The Bank of Japan will also actively fight the yen's appreciation," he said.
Although the epicentre of the quake was 300 kilometres from Tokyo, the northeastern area hosts industrial power plants and factory complexes. Industries may face energy shortages leading to suspended operations and lower capacity in the second quarter.
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