The Bank of Thailand is backing government initiatives to address the issue of cheap Chinese products flooding the Thai market.
Thailand has consistently recorded a trade deficit with China since 2001, according to Piti Disyatat, secretary of the central bank’s Monetary Policy Committee (MPC).
The price index of imported goods from China is lower than the overall index for all imported products, including durable and non-durable goods and machinery, he said.
“The influx of Chinese goods has affected Thailand’s manufacturing sector to varying degrees depending on the industry,” said Mr Piti.
“This situation has also contributed to maintaining Thailand’s inflation rate at a low level. While low inflation benefits consumers by reducing living costs, it negatively affects the manufacturing sector and overall competitiveness.
“Countries around the world have been affected by a flood of Chinese products, and many have taken various measures to address the issue. The central bank supports the government in its efforts to tackle this challenge.”
He said locally made products such as electrical appliances, textiles and furniture are expected to continue to face pressure from an avalanche of Chinese goods. Some industries, such as automobiles and their suppliers, are experiencing difficulties based on Thailand’s uneven economic recovery, said Mr Piti.
According to the central bank, sectors experiencing a weak recovery include the auto industry, integrated circuits and hard disk drives. These industries account for 6% of GDP, 5% of total employment and 6% of all business operations.
Industries facing an unclear rebound include property and construction, agriculture and those directly affected by the influx of Chinese products, noted the central bank. Together, these industries represent 34% of GDP, 51% of employment and 30% of all businesses.
The regulator said the property and construction sectors have also been hampered by recent delays in government budget disbursements. Slower growth in loans for property, building, construction and mortgages is also dimming the business recovery in these sectors.
The tourism and service sectors have rebounded, although second-tier cities are benefiting less than major tourism destinations. These industries account for 60% of GDP, 44% of employment and 64% of all businesses.
As a result, tourism is expected to be a key driver of Thailand’s economic growth this year, according to the central bank.
Mr Piti said the baht’s volatility against the dollar has had varied effects on businesses. However, the baht’s movements are in line with regional peers and are largely influenced by the greenback as well as US monetary policy, noted the central bank.
Domestically, rising gold prices and the swift political transition following the appointment of the new prime minister have contributed to greater stability in the new government, he said. These internal factors support a stronger baht against the dollar, said Mr Piti.
This year the baht has remained stable against the dollar after depreciating earlier in the year, with a strengthening trend observed over the past few weeks, he said.
