Research from the RHB Group shows that the fallout from the Brexit will be felt as far away as Thailand. While the repercussions are not expected to be severe, experts believe some Thai exports to Europe and the UK could be vulnerable, but there should be no problems in regards to the European Union’s foreign direct investment in Thailand.
At the moment more than ten percent of Thailand’s exports are sent to the EU including 1.6 percent of those going to the UK. RHB Group noted that the top five Thai exports to the EU are electronics, broilers, memory cards, jewelry and eyeglass lenses. Meanwhile the top five products exported to the UK are chickens, auto parts, jewelry, canned seafood and computer parts.
It is predicted that the weakening of the Euro and British pound against the Thai Baht will affect three main sectors since margins will be cut and costs raised. Food, auto parts and electronics are likely to be hit the hardest.
The Brexit could also increase pressure on Thailand’s export growth this year as well as next year hindering the country’s economic recovery. Economists at RHB Group speculate that Thailand’s Monetary Policy Committee may decide to lower the key interest rate from 1.5 percent later this year to prevent GDP growth momentum from slowing down.
There is some good news, however, as Great Britain’s exit from the EU will pose a very limited threat to FDI in Thailand. UK investors accounted for only USD9.5 million, or 0.1 percent, of total FDI in Thailand. Tourism is also unlikely to be hurt by the Brexit with only a slightly decrease in the number of visitors from the UK and EU expected.
Finally, the Brexit could create some opportunities for Thai companies such as Minor International who may look to take advantage of a stronger baht to buy distressed properties in European locations.
