Goodbye, Bangkok: Thailand economy whammed by EU exit

A trade stalwart slashes its ties.

Besieged Thailand has taken another hit, after the European Union halted all official visits to Thailand and suspended the signing of a partnership and cooperation accord with Bangkok.

According to Maybank Kim Eng, this pullback further jeopardizes Thailand’s already shaky economic growth outlook.

“A pull-back in Europe’s participation to Thailand’s investment and exports will have a significant effect on the economic growth outlook for Thailand. Given the lack of growth drivers in the short to medium-term horizon, jeopardizing exports and investments poses risk to our base-case scenario the economy will improve in 2H14,” noted Maybank Kim Eng.

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The EU is an important trade partner of Thailand, accounting for about 10% of total exports or c.THB700bn, which is equivalent to 6% of nominal GDP. In addition, Europe has emerged as the increasingly more important foreign direct investor in Thailand.

On the basis of 4M14 board of investment (BOI) approvals, Europe accounted for 21% of the total and, more importantly, posted 300% YoY growth, which helped to take up the slack from the 57% YoY drop in the Japanese applications. On a five-year cumulative basis, Europe accounted for 9% of Thailand’s FDI.