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Thailand: a vital global supply base in Southeast Asia

Consistent growth in both exports and manufacturing strength across multiple sectors has made Thailand an important global supply base in Southeast Asia.

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Thailand - global share

Thailand’s exports grew at a CAGR of 7% between 2001-2021. As in the case of many other countries, Thailand experienced a decline in its exports during 2020, when exports fell by 1% to USD 231 bn. However, they grew again rapidly in 2021 – by a whole 15% – to USD 267 bn.

Several factors contributed to this growth:

  • Stronger global demand
  • The expansion of the global manufacturing sector
  • A weak Baht
  • The rise in crude oil prices

More than half of Thailand’s exports during 2021 came from the machinery & electronics sector and the chemicals & plastics sector.

Trends:  Although the USA, with a 15% share, was the top consumer of Thailand’s exports in 2021, the country also exports a large number of goods to its Asian neighbours, such as China, Japan, and Vietnam. These countries consumed 14%, 9%, and 5%, respectively, of Thailand’s exports during 2021.

Some interesting statistics to note on this growing global supply base:

  • Thailand’s total exports grew by 15% from USD 231 bn in 2020 to USD 267 bn in 2021
  • Total exports also grew at a CAGR of 7% from 2001 to 2021, with exports of transportation goods and chemicals & plastics experiencing the highest growth at 13% and 11%, respectively, during this period
  • The top 20 exports of Thailand were valued at USD 114bn, and these made up a 43% share of total exports
  • Around 29% of Thailand’s total exports in 2021 went to the USA and China, and these mostly consisted of machinery & electronics, as well as chemicals & plastics
  • Consumer and capital goods make up 71% of Thailand’s total exports, while raw materials and intermediate goods make up the remaining 29%
  • In 2020, Thailand had enjoyed a trade surplus of USD 22.8 bn. However, it suffered from a trade deficit of USD 1.5 bn in 2021
  • In 2021, the machinery & electronics sector comprised 32% (USD 85 bn) of exports, followed by chemicals & plastics (19%), and agricultural & forestry (16%)
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Upshot: The Thai economy, which is the second largest in Southeast Asia, is estimated to have expanded by 2.2% in Q1 of 2022, compared to the same period a year earlier. This growth has been made possible, both by robust exports, and an easing of COVID-19 restrictions. This is in spite of low tourist arrivals and high inflation, both of which dampened consumer spending.

The global economic recovery, especially in the US and in Europe, stimulated the demand for Thai exports. Thailand is a member of the Association of Southeast Asian Nations (ASEAN) and is also a signatory of the Regional Comprehensive Economic Partnership agreement (RCEP) in conjunction with 14 other countries (5 non-ASEAN members). This makes it easy for these countries to import goods from Thailand.

  • Since Thailand mostly exports machinery & electronics, it can tap into the higher demand for computers and integrated circuits globally
  • Fuels, chemicals & plastics, as well as transportation, are sectors, which, in Thailand has seen an increase in annual export growth of around 55%, 28% and 22%, respectively in 2021
  • Thailand is also one of the world’s biggest exporters of rubber
  • Exports are expected to rise by 3-4% in 2022, as strong global demand is expected to continue. However, the spread of the Omicron Covid-19 variant, rising inflation, and supply chain disruptions continue to pose challenges
  • Thailand aims to form greater trade partnerships, as it signed ‘mini-FTAs’ with Telangana, a state in India; Gansu, in China; Gyeonggi, in South Korea; and Busan in South Korea. These mini-FTAs will help to increase Thailand’s exports. For example, the mini-FTA with Telangana is expected to help grow Thai exports to India by 4-5%
  • Thailand’s participation in the RCEP trade deal will also provide a boost to its exports

Imperatives: Thailand is experiencing a positive trend in its exports, in new business registrations, and in manufacturing output – these are all indicators that the Kingdom’s economy is moving steadily in the right direction, despite the persistence of the pandemic.

It would pay to consider Thailand as a competitive supply base, by taking advantage of its strong economic development, manufacturing strength, and its capacity to recover more swiftly, despite the ongoing challenges.

Some final thoughts for importers and supply chain managers:

  • Have a robust procurement strategy by selecting the right manufacturers/suppliers
  • Thailand’s currency, the Baht, is likely to remain conducive for exports, and the container shortage issue should also ease soon
  • Procurement managers should take advantage of Thailand’s participation in trade agreements, such as the RCEP, in order to leverage potential benefits for sourcing products from the country
  • Find the sectors in which Thailand has strong export potential, as it becomes an essential future supply hub, with global demand for exports gradually shifting towards Asia

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