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Thailand slashes 2019 exports estimates as trade war escalates

The Thaiger & The Nation

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Thailand slashes 2019 exports estimates as trade war escalates | The Thaiger

by Phuwit Limviphuwat

Thai exporters are expected to pay a heavy price as the ramping up of the US-China trade war continues.

The US has now launched a new round of tariffs on Chinese imports. Last Friday US President Donald Trump tweeted:

“Talks with China continue in a very congenial manner, there is absolutely no need to rush, as Tariffs are NOW being paid to the United States by China of 25 per cent on US$250 billion worth of goods and products. These massive payments go directly to the Treasury of the US.”

The US tariffs target technological goods such as machinery parts, electrical circuits and auto parts that are manufactured in Thailand. These goods are then shipped to China, from where they are exported to the US after ‘value addition’, according to the National Economic and Social Development Council.

The implementation of more tariffs could be a part of the US strategy to gain leverage in negotiations with China, Thai acting Commerce Minister Chutima Bunyapraphasara said.

“The increase in tariffs is a demonstration by the US that President Trump is willing to act on his threats,” said Chatree Rojana-Arpa, executive vice president for strategy and product development at KTB Securities Thailand.

“President Trump wants to use this move to negotiate with China from a favourable position. If there is progress in the negotiations, the tariff rates will likely be brought down.”

This sentiment is reflected in Thailand’s capital market, which has not taken a significant hit from the trade war escalation until now. This is because investors are still expecting the tariffs to come down in the near future as US-China trade negotiations make progress, Chatree said.

On the other hand, a drawn-out escalation of the trade war would further hamper Thailand’s exports, which have been performing poorly in 2019. In the first quarter of this year, Thai exports were valued at US$61 billion, a 1.64% contraction compared to the same period last year.

In 2018, Thai exports grew by 6.7% year on year. As a result of the trade war escalation, various financial institutions have cut their export forecasts for 2019 to less than half of last year’s growth.

“If US-China trade tensions continue to escalate, Thai export growth for 2019 is likely to be lower than our recent forecast of 2.7%,” said Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank’s Economic Intelligence Centre.

“In particular, goods in the supply chain affected by the trade war, such as computers and parts, integrated circuits and rubber, have already shown a year-on-year contraction of between 18 and 25% in the first quarter of this year.”

The Commerce Minister said Thailand would gear its trade negotiations to open up more tariff-free opportunities for Thai exporters.

SOUECE: The Nation

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Former finance minister says government shouldn’t bail out Thai Airways

The Thaiger

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Former finance minister says government shouldn’t bail out Thai Airways | The Thaiger

Former Thai Finance Minister and current Democrat list MP Korn Chatikavanich is voicing his concerns over the financial crisis gripping Thai Airways and objects to any plan to use taxpayer money to rescue the ailing legacy airline.

Korn says Thai Airways’ financial current troubles are similar to the situation in 2008, when the company struggled to find money to repay its debts.

He says he agrees with Banyong Pongpanich, a veteran investment banker, that the national carrier must cut costs.

Korn, when acting as Finance Minister a decade ago and asked by Thai Airways to help bail them out, said at the time he would not guarantee new loans, that the company must have a rehabilitation plan and that they must cut costs.

The Democrat MP said the government at the time brought in a new management team and professional board members to Thai Airways and the airline made profits in 2009 and 2010, but the airline went back into the red a year later and has remained in debt ever since.

He noted in a Thai PBS World article that tourist arrivals in Thailand have increased every year and other local airlines have made profits, except Thai Airways.

Former finance minister says government shouldn't bail out Thai Airways | News by The Thaiger

Democrat MP Korn Chatikavanich – Facebook

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Executives at Thai Airways asked to take pay cut

May Taylor

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Executives at Thai Airways asked to take pay cut | The Thaiger

PHOTO: Thai Airways and Thai PBS World

“An unnamed source in the Transport Ministry says the airline’s financial predicament is very serious and puts it at risk of bankruptcy.”

The country’s national flag carrier, Thai Airways, could be in deep financial trouble and may need to delay repaying its debt or seek new loans.

Thai PBS World reports tat the airline’s president Sumet Damrongchaitham says he has asked senior executives at the airline to voluntarily reduce their meeting allowances and salary in order to help the airline survive this latest challenge.

Mr Sumet includes his own remuneration in the proposed cuts.

“This is just one of the measures to cut costs so that THAI will be able to compete in the aviation industry. The spirit of the board and executives will inspire others in our organisation to realise that it is high time that we join forces in all ways to survive this crisis. Whatever can be sacrificed must be sacrificed.”

Mr Sumet also reassured staff that the cuts would be applied to management only and would not affect the quality of Thai Airways’ services.

An unnamed source in the Transport Ministry says the airline’s financial predicament is very serious and puts it at risk of bankruptcy. The source puts Thai Airways’ total debt at around 245 billion baht.

Purchasing a new fleet of planes, worth an estimated 156 billion baht, would make it the world’s most indebted airline, should permission for the purchase be granted.

SOURCE: Thai PBS World

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Growth of Thai economy lowest in nearly five years

May Taylor

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Growth of Thai economy lowest in nearly five years | The Thaiger

PHOTO: Supply Chain Asia

The Thai economy registered growth of just 2.3% in the second quarter of 2019, compared with 2.8% in the first quarter. This is the lowest rate of growth in 19 quarters, according to Tossaporn Sirisamphan, secretary-general of Thailand’s economic think-tank, the National Economic and Social Development Board.

Tossaporn warns that although the situation is not yet critical, the government must act quickly to prevent a further economic slump.

Thai PBS World reports that, reacting to an economic stimulus package of over 300 billion baht approved last week, he insists exports must expand by at least 3% during the second half of 2019, while tourism numbers must exceed 20 million, or tourism revenue must generate 2.4 trillion baht.

He also calls for private investment to increase by at least 2.9% in the last two quarters of the year, if the economic slowdown is to be reversed.

Mr Tossaporn points the finger at global economic uncertainty, including the US-China trade war, and Thailand’s own political situation, as contributing to the instability. He also voices concern about the devaluation of both the Chinese and South Korean currencies, coupled with bearish stock markets worldwide.

Not wanting to be the voice of total doom and gloom, he says he’s hopeful the economy will recover during the last two quarters of 2019.

SOURCE: Thai PBS World

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