Thailand Adjusts Strategy Amid Shifting Chinese Economy, Eyes India as Alternative

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In fiscal 2023, Thailand experienced a 1% decline in its overall exports, although excluding oil, gold, and military supplies, there was a modest uptick of 0.6%. The nation’s trade deficit improved significantly, amounting to 302.93 billion baht compared to 612.57 billion baht in 2022.

Examining Thailand’s key export markets in 2023 unveils intriguing trends. While the United States witnessed a 2.2% increase in Thai exports, both China and Japan saw slight declines of 1% and 0.57%, respectively. On the import front, China experienced a 0.6% decrease, Japan declined by 10%, and the US reported a notable surge of 8.9%.

China remains a crucial trading partner for Thailand, serving as a primary source of imports and the second-largest destination for exports. However, Thailand has grappled with a persistent trade deficit with China, which reached 1.29 trillion baht in 2023, representing a marginal increase from 2022.

As Thailand navigates economic challenges, attention turns to China’s slower economic expansion. Despite ongoing growth, the pace has moderated, with projections hovering around 4-5%. Wisit Limluecha, vice chair of the Thai Chamber of Commerce and president of the Thai Future Food Trade Association, highlighted China’s struggles with weak private consumption and investment, coupled with a concerning inflation rate reaching its highest level in 14 years.

Moreover, China’s annual exports experienced their first decline since 2015, and GDP growth stood at 5.2% in the fourth quarter of 2023. Of particular concern is the “GDP deflator,” which has contracted for three consecutive quarters, signaling economic sluggishness and the looming risk of deflation.

Wisit emphasized that China’s economic vitality significantly influences its citizens’ purchasing power and, consequently, imports from Thailand. To mitigate risks, Thailand has endeavored to diversify its markets, with a heightened focus on the Indian market due to similarities with China in terms of characteristics and size.

Thailand has implemented various initiatives to address potential risks, including negotiations to tackle trade barriers, domestic activities, exploration of secondary markets, and the pursuit of free trade agreement negotiations. These efforts are pivotal in bolstering Thailand’s exports and driving the expansion of the Thai economy in a challenging global economic landscape.