Thailand: Export growth picks up as trade balance returns to positive territory in February
In February, export growth came down from the prior month’s multi-year high, but beat expectations. The external sector recorded a USD 810 million surplus, significantly below the trade surplus recorded in the same month of last year, which had come in at USD 1.6 billion. The print contrasted the USD 120 million deficit recorded in January and marked the first trade surplus in three months. However, the 12-month sum of the trade balance moderated again in February, dipping to a USD 12.2 billion surplus from the USD 13.0 billion surplus in the previous month.
Exports grew 10.3% year-on-year in February, a considerably slower pace of expansion than January’s 17.5% annual increase. The moderation was primarily due to lower demand during the Lunar New Year holiday in early February. However, export growth in February beat market expectations of a softer 9.2% increase. The increase in overseas sales was broad-based; exports of industrial products, such as automobiles, computers and chemicals, especially picked up. Meanwhile, agriculture exports grew for the 16th consecutive month. Shipments to all major markets rose, and there was a sizeable increase in demand from India and Japan. Import growth also moderated in the same month but still outpaced export growth. Imports grew 16.0% on the year, notably below the prior month’s 24.3% year-on-year expansion.
The strength of the currency is, however, worrying exporters and the commerce ministry. As the baht continues to appreciate against the U.S. dollar, exporters’ competitiveness, and therefore profitability and incomes, are decreasing. The baht is hovering around multi-year highs against the dollar and traded at 31.14 THB per USD on 22 March. Moreover, in local currency terms, Thai exports contracted, albeit marginally, for the first time in a year. Business confidence as measured by the Industrial Confidence Index decreased for the first time in four months amid fears of currency risks and rising protectionism in key trading markets, notably the United States. In addition, the scheduled minimum wage hike in April could further hurt export competitiveness and profitability. All told, pressure on the Bank of Thailand to intervene in the foreign exchange market is increasing.