Thailand's trade ends 2020 on strong note with exports, imports returning to growth

THAILAND'S trade ended 2020 on a strong note, with economists expecting the export recovery to help extend the country's recovery in 2021.

In December, both exports and imports returned to year-on-year growth for the first time since the Covid-19 pandemic began, up 4.7 per cent and 3.6 per cent respectively.

The performance reflects both improving global demand and a domestic recovery, said Barclays economists Brian Tan and Shreya Sodhani.

"The manufacturing and export recovery will help offset the weakness in tourism as borders will remain closed during the first half of the year," said Maybank Kim Eng analysts Lee Ju Ye and Chua Hak Bin, who maintained their 2021 gross domestic product (GDP) growth forecast at 5 per cent.

In December, core manufactured exports - excluding precious stones and jewellery - grew 7.6 per cent, driven by double-digit growth in exports of electrical equipment and electronic machines.

Agriculture exports also returned to growth after two months of decline, led by tapioca.

The Maybank Kim Eng analysts noted that Thailand's Ministry of Commerce forecasts exports to grow 4 per cent in 2021, as global trade improves with the vaccine rollout and economic stimulus in many countries.

But downside risks include the uncertainty of Covid-19 outbreaks, the appreciating Thai baht, and a shortage of shipping containers, which has resulted in freight rates rising since last summer, they added.

As for imports, raw material imports surged 13.6 per cent, driven by chemicals, as well as iron and steel products - boding well for the domestic demand recovery, said the Barclays economists.

Imports of both capital and consumer goods also improved, rising 8.9 per cent and 2.1 per cent respectively.

"As imports pick up pace sequentially, in tandem with a recovery in domestic demand, the goods trade surplus will likely remain under pressure," said the Barclays economists.

Though the recovery is underway, the Barclays economists expect the Bank of Thailand to keep its monetary policy rate steady through 2021, to preserve its limited policy space.

"The MPC (monetary policy committee) has already acknowledged that it will take two years for economic activity to return to pre-Covid levels. Hence, we think it is unlikely that a still-weak economy in Q4 and a soft rebound in 2021 will change the bank's assessment and lead to a rate cut," they said.