Thailand's export forecast cut and downside risks to growth

Thai exports, which constitute c.56% of the country's GDP, have contracted in each of the first three months of this year. This week, the NESDB cut its 2015 export growth forecast to almost flat (0.2%) from its previously optimistic 3.5%, while the BoT has expressed concern about the risk of exports contracting again this year.

Thailand's nominal effective exchange rate (NEER) weakened only slightly in April to 109.62 and remains close to its strongest level since the Asian financial crisis. This is in an environment where Thailand's major trading partners have been slowing down and the country needs to improve its competitiveness.
 
The recent relaxation of FX regulations is unlikely to weaken the Thai baht much, given Thailand's strong external position (FX reserves provide more than 2x external debt cover) and current account surplus. In addition, Thai financial institutions have invested only c.USD 26bn in foreign securities, well below the current USD 50bn limit.