Thailand: Export growth beats market expectations in September, despite ongoing worries over the strength of the currency
October 31, 2017
Thailand’s external sector recorded a USD 3.4 billion surplus in September, coming in ahead of the surplus registered in the same month a year ago. The 12-month sum of the trade balance improved from a USD 14.4 billion surplus in August to a USD 15.1 billion surplus in September, marking the second consecutive month this year in which the 12-month sum of the trade balance did not decrease.
Exports grew 12.2% on an annual basis in September, which was below the previous month’s all-time high of 13.2%, but still beat market expectations. In September, export growth was sufficiently broad-based, as all but two sub-groups—miscellaneous manufactured goods and re-exports (exports that are re-imported within 12 months without any change in character or form)—recorded lower export values than a year ago. Mineral fuel and lubricant exports recorded the greatest increase in export values, closely followed by crude minerals. On the imports side of the equation, growth in imports slowed more markedly from 14.9% in August to 9.7% in September. The more modest pace of expansion was driven primarily by a decrease in the import value of mineral fuel and lubricant, followed by chemicals and manufactured goods imports.
September’s trade data is another indicator that the second-largest economy in Southeast Asia is gaining traction. Because of the external sector’s solid performance so far this year, the Commerce Ministry increased its exports forecast for the second time in a month; it now expects exports to grow more than 8% annually. The second upgrade follows the seventh consecutive month in which export growth registered year-on-year gains. Furthermore, for the first nine months of the year, export growth tallied a robust 9.3% increase compared to the same period a year ago. Although exporters are reporting that they are under pressure from a strong baht, historical evidence shows that trade partners’ economies matter more, according to the Central Bank. Moreover, exports are seemingly unhurt by the strong currency.
September data showed that the U.S. was the second-biggest export market for Thai goods, trailing only China. Developments in the U.S. could drag on export growth going forward. Thailand is creeping closer to meeting the criteria set by the U.S. Treasury for unfair currency practices. Moreover, the country also meets the criteria under President Trump’s executive order to investigate countries responsible for the large U.S. trade imbalances.
Author: Jan Lammersen, Economist