Thailand: Export growth reaches multi-year high despite strong baht currency
September 29, 2017
Thailand’s external sector recorded a USD 2.1 billion surplus in August following the first trade deficit since April 2015 in July. August’s surplus matched the surplus of the same month a year ago. The 12-month sum of the trade balance matched the previous month’s figure and came in at a USD 14.4 billion surplus in August. August’s result marks the first time since January that the 12-month sum of the trade balance has not decreased.
Exports grew 13.2% on an annual basis in August, which was above the previous month’s 10.5% increase and significantly above the 4.9% increase expected by market analysts. Moreover, August’s print is the fastest rate of expansion in nearly five years. The uptick in the pace of the expansion was broad-based, as all but two commodity groups—machinery and re-exports (exports that are re-imported within 12 months without any change in character or form)—recorded higher export values compared to the same month last year. Food and crude materials exports increased the most compared to a year ago. Looking at the other side of the external sector, imports grew 14.9% on an annual basis in August, which is significantly below the previous month’s 18.5%. Import growth was also broad-based with imports of gold, minerals and fuel doing the heavy lifting.
According to officials, the trade data in recent months suggests that the economic recovery is gaining more traction. However, analysts point to the ongoing recovery in global trade as the driver of Thailand’s trade-dependent economy. Although the domestic economy has proven robust, private consumption remains sluggish and is likely dented by high household debt and weak job growth. The growth of the whole economy, moreover, lags behind the majority of its peers (Thailand H1 2017: +3.5%; ASEAN H1 2017: +4.9%). Growth could continue to lag due to the strong Thai currency, which has made the biggest gains against the U.S. dollar this year compared to other Asian currencies, possibly dragging on exports in the year ahead. According to the commerce ministry, the effects of the strong baht on exports are likely to be felt next year, as deals for the remainder of the year have already been agreed upon.
Author: Jan Lammersen, Economist