Outlook for Thailand 'clouded by uncertainty'

The outlook ahead, says DBS, is clouded by uncertainty surrounding the Chinese and US economies plus lingering risk of a blowout in Europe.

DBS Group Research noted:

Customs trade data (Jun) could be out today or sometime next week. It will be the first economic data for June out of Thailand.

Exports have moved sideways in recent months in value terms but have generally continued to clock steady increases in volume terms. The outlook ahead is, however, clouded by uncertainty surrounding the Chinese and US economies, in addition to lingering risk of a blowout in Europe.

Growth in China has been especially critical in driving growth in Asia, and even global growth. Growth in commodity exporting countries (Africa, Latam, Australia) has, for example, leveraged off Chinese demand.

The slowdown in China GDP in the second quarter and the slowing pace of growth in the US are thus major risk factors ahead. Export volumes may have fallen in June as businesses cutback on orders to factor in risks of a hard-landing in China or petering out of growth momentum in the US. Export values would additionally suffer from the decline in commodity prices.

Data out of the region also show exports weak in many countries, with China an exception rather than the rule. Exports data are lumpy and volatile and it is not possible to pinpoint the extent of decline in Thai exports in June. A drop of 5-10% (MoM, sa) from levels in May is possible in light of recent developments. This translates to export “growth” of -2.5% to -7.5% (YoY), worse than the -1.5% average in Jan-May.