Strong baht barely dents Thai exports

Related strengthening of Asian currencies against the dollar has limited any adverse impact on Thailand’s exports as the baht appreciates rapidly, reducing the urgency for the Bank of Thailand to quickly adjust interest rates, say analysts.
Merchandise exports gained momentum, surging 7% year-on-year and 1.8% month-on-month to US$26.2 billion in August, beating the consensus of 5.8%, according to Kuala Lumpur-based Maybank.
External demand for agricultural products, which soared 17.5%, drove the uptick, along with a 13.9% gain for electronics shipments, especially hard disk drives, up 112%.
In contrast, exports of manufactured goods, which account for four-fifths of shipments, posted subdued growth of 5.2%.
Excluding electronics, shipments of manufactured goods rose by a modest 3% as vehicles and parts exports dropped for the fourth straight month, plunging 17.9%, attributed to intense competition.
The baht has gained 11.5% from its recent troughs, yet appreciated a more modest 4.7% year-to-date, Maybank said in a research note jointly prepared by director of macro research Erica Tay.
“We think that concomitant strengthening of Asian currencies against the dollar limits any adverse impact on Thailand’s export competitiveness. Moreover, the baht’s recovery may help usher in investment flows,” noted the research.
BofA Securities said Thailand’s export growth was broad-based, with shipments excluding gold soaring 6.2% year-on-year. Exports exceeded forecasts, turning the trade balance to a surplus last month of $269 million.
For the first eight months, shipments increased 4.2% year-on-year.
“Greater export growth than expected in both July and August poses an upside risk to our current forecast of around 2%. There are also signs of a broad-based improvement in manufacturing production from a low base,” BofA said in a research note. “If this trend continues, it could provide upside to our GDP forecast.”
Maybank anticipates the Bank of Thailand will start interest rate cuts in the first half of 2025.
“We expect the central bank to be more open to easing when data indicates broad economic weakness, threatening its growth outlook,” according to BofA, adding it is maintaining its Thai growth forecasts at 2.4% and 2.8%, respectively, for 2024 and 2025.