Thailand: Merchandise exports contract at softer rate in July
August 24, 2020
Merchandise exports fell 11.4% over the same month last year in July, softening from June’s 23.2% dive. The improvement was primarily driven by milder declines in vehicles and jewelry exports. Meanwhile, merchandise imports dived 26.4% over the same month last year in July (June: -18.0% yoy), as a high base effect weighed on the year-on-year outturn.
As a result, merchandise trade balance improved, recording a USD 3.3 billion surplus in July (June: USD 1.6 billion surplus). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 19.4 billion surplus in July, compared to USD 16.2 billion surplus in June.
The prolonged nature of the pandemic will weigh heavily on the overall economy this year, as weak external demand weighs on exports, and diminished domestic activity and supply-chain disruptions impair imports. A weakening of the Chinese economy and uncertainty regarding future demand for Thai products both tilt risks to the downside.
On July’s results, Charnon Boonnuch and Euben Paracuelles, economists at Nomura, noted:
“Importantly, officials today also reported no tourist arrivals in July, unchanged from Q2, despite some relaxation of border restrictions. This is consistent with our view that tourism revenue, which has been the major driver of the current account surplus in the past few years, should stay close to zero in H2.”
Regarding this month’s reading, Prakash Sakpal, senior economist at ING, commented on the potential knock-on effects for the Thai baht:
“While a rising trade surplus is no relief to authorities worried about the strong currency potentially threatening the recovery in exports and tourism, they should take comfort in a narrowing current account surplus, which should act as a headwind to currency appreciation this year.”
Author: Stephen Vogado, Economist