With exports continuing their slide and prospects still bleak for next year, questions linger about what's killing Thai shipments, which account for up to 70% of GDP.
Some blame external factors such as the slower-than-expected global economy, low oil and farm prices and a weak-currency policy applied by several manufacturing countries.
But many argue that troubled exports stem largely from structural problems at home.
No matter what the underlying reasons, Thailand's exports are encountering problems, and not for the first time. Thai shipments fell by 0.3% in 2013 and slid 0.4% in 2014.
The Commerce Ministry last Monday said exports plunged for an eighth straight month in August, down 6.69% year-on-year, to a value of US$17.7 billion.
That performance was the second worst this year after a 7.87% year-on-year decline in June, which was the biggest drop since an 8.15% fall in December 2011.
Shipments of agricultural and agribusiness products fell by 8% year-on-year to $2.73 billion in August, while industrial goods slipped by 3.2% to $13.9 billion.
For the first eight months of 2015, exports amounted to $143 billion, down by 4.92% year-on-year.
Shipments of agricultural and agribusiness products during the period dropped by 6.5% year-on-year to $221 billion, while those of industrial goods fell by 3.2% to $112 billion.
Somkiat Triratpan, director of the Commerce Ministry's Office of Trade Policy and Strategy, says the depressed shipments derive mainly from the sluggish economies of the US, the EU, Japan and China, as well as low commodity prices and the weak currencies of certain trade partners.
Chronic problems
Aat Pisanwanich, director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce, argues that apart from global economic factors, the structural problems of the Thai economy play a role in low exports.
"Thailand's export structure is hardly changed from 20, 30 years ago," he says.
"Our key exports remain agricultural products like rice, rubber, tapioca and fruit, for which several countries such as Vietnam, Cambodia, Laos and Myanmar have developed production capacity and quality that is competitive with Thai products."
The industrial sector also sees mounting challenges from higher wages and worker shortages at home, particularly for labour-intensive industries like garments.
According to Mr Aat, nearly all garment makers have shifted their production base to neighbouring countries to make the most of cheap labour, tariff exemptions and bountiful raw materials.
"Thailand's export sector is now in a transitional period," he says. "We expect Thailand to take up to five years to fine-tune labour-intensive industries and create products that are innovative and add value, the so-called Industry 4.0."
Industry 4.0, or the fourth industrial revolution, is a collective term embracing a number of contemporary automation, data exchange and manufacturing technologies.
Mr Aat says Thailand's export-oriented industries are in dire need of supply chain development.
"Today, we have to clearly determine what industry in the supply chain we're really good at," he says. "For instance, if we're good at downstream, we have to rely on raw materials supplied by other neighbours."
For the agricultural products in which Thailand is rich, it is imperative for the sector to develop in line with global demand trends and the shift towards organic products.
The government also needs to think about consumer demand in each market, geographical indication and origins so that shoppers can trace back production and the stories behind the goods.
According to a Credit Suisse report, Thailand's market share in hard disk drive production has declined dramatically and never recovered after the 2011 flood crisis. Multinational corporations have shifted production bases to China and the Philippines.
A surge in manufacturing wages between 2012 and 2013 could be one reason behind the erosion of competitiveness in Thai manufacturing, Credit Suisse said. The rise was driven by the minimum wage increase and the rice-pledging scheme introduced by the Yingluck Shinawatra government in 2011.
By attracting labour to the agriculture sector, the programme may have worsened labour shortages in other sectors, adding to upward wage pressure, the report said.
Kimeng Tan, senior director of sovereign and international public finance ratings for Asia-Pacific at Standard and Poor's Ratings Services, says Thailand's manufacturing sector is likely to have a slower growth trajectory because car production is plateauing.
"It started from a small base and built up very rapidly, but the operations are very big now and we're not expecting Asean demand for vehicles to grow very fast," he says.
Nopporn Thepsithar, chairman of the Thai National Shippers' Council (TNSC), says Thai exports are set to fall for a third year in a row in 2015, a symptom of the "new normal".
The new normal is a term in business and economics that refers to conditions following the global financial crises of recent times. The term implies that something which was previously abnormal has become commonplace.
"Thailand is in dire need of restructuring and overhauling export-related manufacturing," Mr Nopporn says.
"Most Thai businesses remain reluctant to fine-tune their operations, cut costs, increase productivity, develop innovations and better understand customer needs. They, particularly small and medium-sized enterprises, just keep calling and waiting for government assistance."
With its geographical advantages, Thailand could reform itself and become a trading nation capable of controlling both demand and supply: "Digital infrastructure, research and development, legal amendments, as well as a shift to more high- tech and innovative products are direly needed to upgrade Thailand's competitiveness."
The TNSC expects Thai shipments to slip into a full-year contraction of 5% or more in 2015 as the pace of the global economic recovery remains slow and foreign exchange becomes more volatile.
Next year's export prospects remain bleak, Mr Nopporn says, with shipments seen as flat at best and the world economy unlikely to fully recover.
"Innovation seems to be the single lifeline for Thai exports right now," he says. "Innovation-driven development means not only adopting new technology but also improving the production process by applying innovations that are affordable and easy for all business sectors to use. More importantly, we also need proactive marketing."
Competitive depreciation
Currency weakness is not a game changer to rev up lagging demand from abroad for Thai products in the current environment. Thailand's trade rivals have also seen their currencies depreciate by the same magnitude or worse because of their particular problems.
Countries often engage in competitive devaluation to boost exports at the expense of trade rivals (the beggar-thy-neighbour strategy). But the depreciation game doesn't let every country play the same game at the same time, given that one country's advantage is the others' disadvantage.
Currency devaluation has become a widespread phenomenon in emerging markets from Latin America to Asia, largely due to the US dollar's strength. Concerns over a looming Fed rate rise have triggered capital flight from riskier assets in emerging markets back to the US.
The baht has fallen by 8.26% against the greenback this year, while Malaysia's ringgit -- Asia's worst-performing currency amid scandals related to an investment company tied to Prime Minister Najib Razak -- is down 18.3%.
Indonesia's rupiah is the second-worst performer on rising fears that Southeast Asia's biggest economy is vulnerable to capital outflows triggered by its large current account deficit. The currency has plunged 8.53% this year.
The steep declines in emerging-market currencies prompted China to jump onto the currency-depreciation bandwagon, devaluing the yuan for the first time in two decades in a bid to maintain a competitive edge in exports.
The weaker currency still has the power to spur export volume, but its effectiveness has diminished, as evidenced by the World Bank's 2014 study entitled "Depreciations Without Exports? Global Value Chains and the Exchange Rate Elasticity of Exports". The research, based on analysis of 46 developed and emerging economies, found that currency weakness between 2004 and 2012 was only half as effective at stimulating exports as it had been between 1996 and 2003.
Pimonwan Mahujchariyawong, deputy managing director of Kasikorn Research Center, says the baht pullback will not help exports as in the past, "because the currencies of some of rival countries are weaker than ours, and those of our two major trade partners -- Japan and Europe -- also fell at a greater pace than ours in a two-year period".
Japan and Europe represent 9.5% and 10% of Thailand's overseas shipments.
Ms Pimonwan says the weaker baht means foreigners buy Thai products at cheaper prices, while locals pay more for the same quantity of imported goods. This also blunts the effectiveness of the country's competitive depreciation. In terms of imports, the baht's weakness has pushed up import costs and half the country's imports are for re-export.
Amonthep Chawla, head of research at CIMB Thai Bank, echoes Ms Pimonwan, saying the weakening baht might cause Thai manufacturers engaged in re-exporting activity to reap lesser benefits from baht depreciation, since they have to shoulder greater import costs for re-exported raw materials.
"Thai manufacturers should not place too much emphasis on price [of merchandise exports], but should consider moving up the [global] supply chain through new innovation," he says.
The baht's value could depreciate further with the Fed's looming rate hike, and a currency war could drag on as countries try to gain benefits from greater export value through currency depreciation.
Mr Amonthep says there could be many "players" in the currency war -- in reference to central banks in China, Indonesia, Japan and Singapore, where economic conditions have not fully recovered -- while the Bank of Thailand could join the weakening trend through further measures aimed at inducing capital outflows, as opposed to lowering the policy interest rate.
Since Thailand is a major net importer of oil, a possible rise in global oil prices next year could also weaken the baht. An upsurge in oil prices would lessen the country's current account surplus, which in turn would induce capital outflows through petroleum buys, Mr Amonthep says.
The baht is still biased downward, with the median forecast of 41 research houses compiled by Bloomberg indicating that the Thai currency will stand at 36.40 to the dollar in the fourth quarter and 36.60 next year.
Taiwan, South Korea and Thailand should have greater incentives to weaken their currencies if the yuan depreciation continues, says Santitarn Sathirathai, the Singapore-based head of economic research for Southeast Asia and India at Credit Suisse.
The central banks of the three countries should have an incentive to keep foreign exchange weaker, he says, as all three economies have weak growth outlooks, very low inflation and manageable external debt, but high household debt could still mute the credit transmission channel of monetary policy.
China's economic slowdown
The International Monetary Fund (IMF) recently cut its global economic growth forecasts by 0.2 percentage points to 3.1% this year and 3.6% the next, warning that China's slowdown and tumbling commodity prices would push global GDP growth to its lowest level since the global financial crisis of 2009. These and other forecasts have set a gloomy tone for export-reliant countries like Thailand and suggest weak demand for exported products.
"When China sneezes, the world catches the flu," the adage goes, and so it has proved. The slowdown in China undoubtedly had spillover effects in the rest of the world, given the country's sheer size (13% of the world economy in dollars terms). The world's second-biggest economy is well known as the world's largest producer of manufactured goods and, most important, it is a major trading partner of various countries in Asia, Europe, Latin America and Africa.
South Korea's exports registered a 14.7% slump in September, their biggest decline since August 2009 (China accounts for a quarter of South Korean shipments). Singapore's key non-oil exports fell at an annual rate of 8.4% in August.
In Thailand, exports are highly likely to end the year with a third straight contraction after a sharp fall in the eight months to August.
Ms Pimonwan says China's cooling economy has both direct and indirect impacts on Thailand's overseas shipments, as Asian countries are also major destinations for Thai exports.
Although the US is becoming a growth bright spot and Thailand could export more there, the damage from China's slowdown will be difficult to erase, she says, noting that Thailand's major exports to the US are electronic parts, a category now fiercely contested by Vietnam.
Mr Amonthep says Thailand's structural problems in terms of export competitiveness, lower commodity prices and China's economic slowdown are the root causes of the disappointing figures in Thai shipments.
"What is more interesting is whether next year's export growth outlook will be akin to this year's export performance and whether exports will be in positive growth territory, as there are structural problems in the global economy," he says.
Besides China and Asean countries, he thinks Thai manufacturers could also examine other export destinations such as countries in the Middle East and Latin America.