Thursday, March 22, 2007

Thai Economics 101: Strong Baht, Strong Export Surge Equals Panic


Surplus swells as exports rise

The Bangkok Post


Thailand enjoyed a trade surplus of US$880 million in January thanks to year-on-year export growth of 17.7%.

According to Commerce Minister Krirk-krai Jirapaet, export revenue for January was US$10.48 billion, while imports rose 2.4% from a year earlier to $9.6 billion.

However, Mr Krirk-krai expressed concern that the country was relying too heavily on exports at a time when the baht was continuing to edge up.

The baht strengthened by 2.07% against the US dollar from Feb 15 to March 15 _ more than the currencies of Singapore (2.05%), China (1.86%), and India (1.75%).

Export items hurt by the baht's rise include farm goods such as rice, tapioca, rubber, shrimp, vegetables and fruit. Items that use imported content _ including electrical and electronic goods, textiles and construction materials _ performed better as raw material costs are lower.

However, Mr Krirk-krai was confident the country's exports this year would expand by 12.5% to $145.9 billion, up from $129.7 billion earned in 2006.

To benefit from the strong baht, the minister advised Thai investors to invest more overseas to enjoy lower costs and follow the government's plan to boost capital outflows to help weaken the baht.

This was also a chance for entrepreneurs to establish new factories, farms and raw material suppliers from overseas, he said.

Why all the panic over the strength of the Baht when exports are up almost 20% in a year?

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